Import to invest: Impact of cultural goods on cross-border mergers and acquisitions

Existing studies have demonstrated the necessities of formal institutions and negativity of cultural distance in international investments. Surprisingly, China’s exponential increase of cross-border mergers and acquisitions (M&As) and its low-quality institutions and distinct cultural norms contradict these studies. This paper aims to tackle this puzzle by examining the role of cultural imports in cross-border M&As. Our empirical evidence suggests that the trade of cultural goods significantly increases the volume and realized economic gains of M&As from importing to exporting countries. Our results are robust to alternative measures and an instrumental variable approach. On exploring potential channels, we find that imported cultural goods could drive cultural convergence between countries and also mitigate the adverse effect of cultural distance on merger outcomes. We further show that cultural imports could help firms in overcoming contractual barriers at target countries. This paper provides practical implications for cross-border investments in the current world with intensified cultural conflicts.     

Cross-border mergers and acquisitions and the role of trade costs

Cross-border mergers and acquisitions (M&As) have increased dramatically over the last two decades. This paper analyses the role of trade costs in explaining the increase in the number of cross-border M&As. In particular, we distinguish horizontal and non-horizontal M&As and investigate whether trade costs affect these two types of mergers differently. We analyse this question using industry data for 23 OECD countries for the period 1990-2001. Our findings suggest that while in the aggregate trade costs affect cross-border merger activity negatively its impact differs importantly across horizontal and non-horizontal mergers. The impact of trade costs is less negative for horizontal mergers, which is consistent with the tariff-jumping argument.     

Technology-acquiring cross-border M&As by emerging market firms: role of bilateral trade openness

This paper investigates the role of bilateral trade openness in technology-acquiring cross-border mergers and acquisitions (M&As) by emerging market firms (EMFs). The cross-border M&A, patents, and financial data from January 2000 to December 2013 have been utilised for empirical analyses. By analysing cumulative abnormal returns of the acquirer EMFs from Brazil, Russia, China, India, and Mexico, the value-creating nature of technology-acquiring cross-border M&As has been confirmed. In addition, the number of the patents owned by the target firms showed a positive and significant effect on the stock performance of cross-border acquirers. Finally, the bilateral trade openness significantly and positively moderated the relation between the innovation capability of the target firms and EMFs’ stock performance.     

Integration and autonomy in Chinese technology-sourcing cross-border M&As: from the perspective of resource similarity and resource complementarity

In this paper, we examine the match between resource relatedness and post-merger integration on technology innovation of acquiring firms to find the rationale behind technology-sourcing cross-border mergers and acquisitions (M&As) of Chinese multinational enterprises. Using a sample of 88 Chinese technology-sourcing cross-border M&As, we find that the acquirer will improve technology innovation when greater resource similarity between the acquirer and target firms is matched with a high integration degree and a low target autonomy level. Meanwhile, the acquirer can improve technology innovation when greater resource complementarity is matched with a low level of integration degree in technology-sourcing cross-border M&As. This paper provides the acquiring firms with fresh ideas of how to make the integration decisions of technology-sourcing overseas M&As. We hope to help multinational enterprises to achieve more outstanding technology innovation performance through technology-sourcing overseas M&As in an intense global competitive environment.     

Exchange rate pass-through in Turkish export and import prices

This article investigates the effects of horizontal acquisitions on the performance of target firms in the 1990s. Using French manufacturing firm-level data, we examine two main indicators of performance: the profit and the productive efficiency. We distinguish domestic from cross-border acquisitions. To evaluate the impact of take-overs, we implement appropriate difference-in-difference estimation techniques associated to a matching propensity score procedure. We find that Mergers &?Acquisitions (M&A) do not increase the profit of French target firms, even on the long run. However, they clearly raise the productivity of target firms. These results suggest that firms probably redistribute efficiency gains at the upstream and/or downstream production stage. There is no evidence of an increase in market power. In addition, the consequences of domestic and cross-border M&A significantly differ. Efficiency gains are stronger for cross-border M&A. This conclusion is however true only for extra-European Union operations. The achievement in the European economic integration certainly explains the absence of difference between European and domestic acquisitions. Finally, our results cast some doubt on the frequent discrimination attitude towards foreign takeovers and the fears of their impact on firms’ performance and the host country's welfare.     

Cross‐border mergers and acquisitions: does the exchange rate matter? Some evidence for Canada

Abstract.  Theoretical and empirical studies investigating the relationship between the exchange rate and FDI have generated mixed results. Using bilateral Canadian-U.S. industry level count data on cross-border mergers and acquisitions (M&As) and conditioning on industry tariff rates, value added share of industries, industry M&A trend activity, and the number of establishments, we find evidence that a real dollar depreciation of the home currency leads to an increase in the probability of foreign M&As but only in high R&D industries. These empirical results are consistent with Blonigen's asset acquisition hypothesis. Results on European M&As of Canadian firms also lean towards this result.     

Can M&A activities act as a predictor of the performance of economic growth or stock prices?

One of the important issues with regard to the relationship between M&As (mergers and acquisitions) and economic growth or stock prices is whether such activities can act as a predictor of these two variables' performance, or whether these variables have resulted in significant impacts on M&A activities. The aim of this paper is to use the method proposed in Kónya (2006) to carry out a causality test among M&A activities, economic growth and stock prices, because the causal relationships that may be uncovered by this would be meaningful for both policymakers and stockholders. This paper uses quarterly data from six OECD countries for the period from April 1980 to March 2010. The bootstrap panel Granger causality test that this work applies also considers cross-sectional dependency and slope heterogeneity simultaneously. The findings of the paper are as follows. There is significant, one-way causality from stock prices to M&A activities, and thus changes in stock prices lead M&A activities. With real GDP as the control variable, for all the countries surveyed, except Australia, stock prices lead M&A activities. As for the impact that economic growth has on M&A activities, we conclude that, when using stock prices as the control variable, there is almost no lead-lag relationship between economic growth and M&A activities, except for in Japan.     

Matching Industries between Target and Acquirer in High-Tech Mergers and Acquisitions

Mergers and acquisitions (M&As) have been regarded as a highly viable option for fostering innovation, gaining new products or services, and gaining access to new markets in high technology firms. This study analyzes several alternative variables that impact M&A choices by analyzing their relationship to the industry of both the acquirer and target. Results support two hypotheses implying that (1) M&A transactions with the same acquirer and target industry are more likely to be acquisitions that delivers a greater final share of the target organization to the acquirer, and (2) acquirers are more likely to invest greater dollar amounts in targets that have the same primary industry.     

多维距离对我国矿产资源企业跨国并购成败的影响 ——地理、经济、制度与文化

以跨国并购的方式获取对海外矿产资源的控制权,有助于保障我国矿产资源安全,推动国内经济高质量发展。基于我国矿产资源企业的跨国并购数据,利用二元Logit模型实证研究多维距离对我国矿产资源企业跨国并购成败的影响。结果表明:地理、制度和文化距离均对我国矿产资源企业跨国并购产生促进效应,且距离差异越大并购越容易成功;经济距离对并购成败的影响不显著。因此,我国矿产资源企业的跨国并购决策应充分考虑多维距离的影响,降低并购风险,又好又快地“走出去”。     

Economic integration and the profitability of cross-border mergers and acquisitions

The 1990s was a decade of increased economic integration. The decade also witnessed a sharp increase in cross-border mergers and acquisitions. From a theoretical perspective, the increase in international mergers in more integrated economies is rather puzzling. It is a well-established result that due to the “business stealing effect”, mergers in integrated markets are not likely to be profitable. A reasonable conjecture would therefore be that closer integration of markets would reduce the attractiveness of cross-border mergers and acquisitions. The present paper demonstrates that this is not necessarily the case: Economic integration may trigger cross-border acquisitions by reducing the business stealing effect and by reducing the reservation price of the target firm. The paper thus provides explanations to the observed increase in cross-border mergers in a world of more integrated economies.     

Analysing the employment effects of mergers and acquisitions

This paper examines the employment effects of mergers and acquisitions (M&As) by using matched establishment-level data from Finland. Our data register practically almost all M&As in all sectors. We compare the employment effects of cross-border M&As with the effects arising from two different types of domestic M&As and internal restructurings. The results show that cross-border M&As lead to downsizing in manufacturing employment. The effects of cross-border M&As on employment in non-manufacturing are much weaker. Changes in ownership associated with domestic M&As and internal restructurings also typically cause employment losses, but they exhibit an interesting sectoral variation.     

Becoming an acquirer and becoming acquired

This paper considers mergers and acquisitions (M&A) in Finland. We explain the likelihood that a firm acquires or is acquired by another firm. We try to find out whether the incidences of M&A are influenced by the firms' R&D activity, measured by the calculated R&D stock. We obtained a very robust result, which says that R&D stock increases the probability that a firm acquires in all industries. In the nonprocessing industries, R&D stock similarly increases the probability that a firm is acquired by another. In the processing industries, the firm's own R&D stock has, however, zero impact on the likelihood that another firm buys a firm concerned. We interpret these results indicating that M&A are used as instruments to transmit knowledge from one firm to another. In the nonprocessing industries, it is evident that knowledge capital cumulated in the target is the main motivation for the purchase. Then a buyer's own R&D—which also increases the probability of the trade—signals that a buyer is efficient in absorbing the purchased new technology. In the processing industries, the motive for acquisition is different. We discovered that in the processing industries, technology is rather transmitted from the buyer's firm than to the purchased firm. It looks like that, in these industries, the firms have decreased their unit costs by means of their R&D activity, and so through M&A, the appeared unit cost differences have been levelled.     

The game analyses to price the target enterprise of merger and acquisition based on the perspective of real options under stochastic surroundings

Although several approaches have been developed to evaluate the target enterprise of merger and acquisition (M&A) such as classical net present value (NPV) evaluation model and real options techniques, the logic of pricing processes in all these approaches is still faulty. The classical approach of NPV perspective to price the target enterprise of M&A has been replaced by integration of contemporary perspectives such as NPV perspective, real options perspective, game perspective, and so on. In this paper, the dynamic analyses model to price the target enterprise of M&A is developed from the perspective of real options integrated with game theory under stochastic surroundings. The synergy multiplication coefficient is introduced into the evaluation model to reflect the synergy management process of M&A, and the equilibrium price formula is proposed by applying the famous offer-counteroffer Rubinstein theorem, which is improved to fit for the stochastic surroundings. The price formula is further discussed on condition that the operating cost is more than or less than profit flow, which is assumed to follow geometric Brownian motion process. The numeric simulations show that the proposed formulas in this paper can perfectly well reflect the realistic practice of M&A.     

Managerial Expectations of Synergy and the Performance of Acquiring Firms: The Contribution of Soft Data

This study examines whether the “soft” information present in merger and acquisition (M&A) announcement press releases contains incrementally valuable news relative to traditional “hard” data. Using the methodology of Loughran and McDonald [2011], we construct measures of synergy expectations and managerial optimism for more than 1,200 M&A announcements over the period 1995–2007. We find that synergy expectations are positively related to announcement period returns, longer-run performance, and the market's reaction to quarterly earnings announcements. Managerial optimism is insignificant for explaining a merger's subsequent performance. We conclude that the soft information contained in M&A announcements concerning synergy expectations can provide useful information to investors.     

The Effect of Mergers and Acquisitions on the Technological Performance of Companies in a High-tech Environment

A large part of the literature from industrial organization and management expects that, compared with unrelated M&As, related M&As show superior economic performance because of synergetic effects that follow from economies of scale and scope. The current contribution takes the debate on the effect of different M&As somewhat further by studying the effect of M&As on the technological performance of companies. In this study the technological performance of M&As is related to a hightech sector, i.e. the international computer industry. The main result of this research is that the so-called strategic and organizational fit between companies involved in M&As seem to play an important role in improving the technological performance of companies     

The triggers and clustering properties of merger waves

This article studies the triggers and the agglomeration of mergers and acquisitions (M&A) activity within clusters constituted by time, market and industry. Based on almost 500,000 individual transactions, we find that industry factors play a significant role in triggering activity and that M&A agglomerates strongly across related industries. While clustering in time turns out to be insignificant, stock market effects can be either an attracting or a repelling force, depending on the type of deal examined. This supports the view that merger waves are largely driven by industry shocks.     

Vertical alliance and vertical integration for the inflow of technology and new product development in the pharmaceutical industry

Pharmaceutical firms are increasingly seeking vertical alliance (licensing and joint venture) or bridges and vertical integration (merger and acquisition, M&A) or buffers. However, the question remains whether alliance and integration modes of organisation contribute to the clinical trials activities for a new product development. Using data on 250 pharmaceutical firms, this study examines the linkage between the external technology-sourcing modes and an increase in clinical trials activities, advancing new product development. The findings indicate that licensing mode may not be an effective in comparison to joint ventures and M&A modes of the organisation. Comparing the two modes – vertical joint venture (bridges) and vertical integration (buffer) – the former appears to be effective than the latter (M&A) in sourcing external technology acquisition in the pharmaceutical industry. Implications of these findings are addressed in terms of strategy and structure in a broader context.     

Determinants of Chinese direct investments in the European Union

This article analyses the determinants of Chinese foreign direct investment (FDI) activities in the European Union (EU). Evidence is based on panel Poisson models drawing on two investment monitors at the individual project level. Greenfield investments (GI) and mergers and acquisitions (M&A) are distinguished. The findings indicate that market size and bilateral trade are the main factors for Chinese investment in the EU. In contrast, business-friendly institutions do not foster FDI. Probably, Chinese investors are risk averse, and prefer regions with less competitive markets. The striking difference between GIs and M&As is related to unit labour costs. Higher costs make the host country less attractive for the establishment of new firms, but do not affect the involvement in existing firms. The sectoral dispersion of Chinese FDI in the EU did not change much since the global financial crisis. Most relevant shifts have occurred in research and development (R&D), where low-income EU countries have become increasingly attractive.     

A structural event study for M&As: an application in corporate governance

We apply structural event study methodology in the context of corporate governance to account for the interaction of two merger and acquisition (M&A) effects: synergy (total value) and dominance (bargaining power). The interaction of these effects simultaneously determines the parties’ abnormal returns. We posit that M&A synergy effects correspond to changes in agency costs between target’s management and target’s shareholders, while the dominance effects correspond to the balance of power between acquirer and target during negotiations. Our structural estimates suggest that more stable or entrenched directors generate higher value during normal operations but are softer negotiators when their firm becomes an acquisition target.     

The role and contribution of networks in M&A of innovative ventures: can lessons learned from networks of Israeli start-ups be applied by China?

Networks’ impact on business outcome is documented in various theories. We examined the role of specific actors in the networks of successful Israeli technology ventures and identified the actor's contribution during early, advanced, and merger and acquisition (M&A) stages. A mixed qualitative–quantitative method was applied to collect insight and data from 185 founder-entrepreneurs who exited via M&A. A name generator-interpreter technique was used to obtain details on the role and contribution of 768 actors. Our findings pointed to the influential role of actors such as Venture Capitalists , angels, board members, and multinational firms, as well as the vital contribution of foreign actors, during M&A transactions. We further draw implications to illustrate that, if applied, lessons learned from sell-side acquired ventures can benefit Chinese companies in their quest to acquire innovation via M&A. We suggest that the understanding of networks practiced by acquired ventures can increase buyers’ accessibility and visibility to target opportunities and improve M&A outcomes.