Cross-border mergers and acquisitions have increased significantly over the last two decades and have substantially changed the European industry, since it has become one of the leading approaches for firms to gain access to global markets. However, there has been little progress in the research literature investigating the role of culture in explaining the success of these cross-border transactions. This paper analyzes if cross-border M&As are more valuable for acquirers between culturally similar countries by investigating the countries’ cultural distance, legal origin, trust, Hofstede’s dimensions, and corporate governance measures. The results indicate that cultural distance has a positive and negative effect on bidder announcement returns. Legal origin has a negative effect on acquirer gains in cross-border M&A whereas trust has a positive but insignificant effect. Hofstede’s dimensions have no particular effect on the data set and corporate governance measures have a strong negative effect on bidder announcement returns. The robustness checks do not alter the results.
Table of Contents
1 INTRODUCTION
1.1 BACKGROUND AND PROBLEM STATEMENT
1.2 AIM OF THIS RESEARCH
1.3 CONTRIBUTION TO PREVIOUS STUDIES
1.4 STRUCTURE
2 THEORETICAL FRAMEWORK
2.1 CROSS-BORDER MERGERS & ACQUISITIONS
2.1.1 Introduction to Mergers and Acquisitions
2.1.2 Cross-border Mergers & Acquisitions
2.1.3 Motives for cross-border M&A
2.2 BARRIERS FOR EUROPEAN TRANSACTIONS
2.2.1 Legal and regulatory barriers
2.2.2 Cultural and political barriers
2.2.3 Corporate governance barrier
2.2.4 Other barriers
2.3 MEASURES OF CULTURAL DIFFERENCES
2.3.1 Cultural distance
2.3.2 Legal origin measures
2.3.3 Trust measures
2.3.4 Hofstede measures
2.3.5 Corporate Governance
2.4 CROSS-BORDER M&A IN EUROPE
2.5 PRIOR EVIDENCE ON CULTURAL DIFFERENCES IN CROSS-BORDER M&A
3 RESEARCH DESIGN
3.1 HYPOTHESIS DEVELOPMENT
3.2 THE SAMPLE
3.3 METHODOLOGY
3.3.1 Abnormal returns
3.3.2 Cumulative abnormal returns
3.3.3 Test Statistic
3.4 EXPLANATORY VARIABLES
3.4.1 Dependent Variable
3.4.2 Independent variables
3.4.3 Control Variables
3.5 SUMMARY STATISTICS
3.6 EVENT STUDY
3.6.1 Short-term analysis
3.6.2 CARs in event studies
3.7 OLS REGRESSION ANALYSIS
3.7.1 The effect of cultural distance on announcement returns
3.7.2 The effect of legal origin on announcement returns
3.7.3 The effect of trust on announcement returns
3.7.4 The effect of Hofstede’s dimensions on announcement returns
3.7.5 The effect of corporate governance on announcement returns
3.7.6 Robustness tests
4 EMPIRICAL RESULTS
4.1 OLS REGRESSIONS OF CULTURAL DIFFERENCES OF ACQUIRERS
4.1.1 Cultural distance
4.1.2 Legal origin
4.1.3 Trust
4.1.4 Hofstede’s dimensions
4.1.5 Corporate governance
4.2 ROBUSTNESS TESTS
4.2.1 Hofstede’s four versus 6 cultural dimensions
4.2.2 Additional event windows
5 CONCLUSION AND LIMITATIONS
5.1 CONCLUSION
5.2 LIMITATIONS AND FUTURE RESEARCH
6 BIBLIOGRAPHY
7 APPENDIX
Objectives and Research Themes
This thesis investigates whether cross-border mergers and acquisitions (M&As) within the European Union are more successful when the involved countries share similar cultural characteristics. The primary research question centers on the impact of cultural distance, legal origin, trust, Hofstede’s cultural dimensions, and corporate governance measures on the shareholder wealth effects for European acquiring firms.
- Analysis of the relationship between national cultural distance and bidder announcement returns.
- Evaluation of the influence of legal origin and institutional trust on cross-border M&A success.
- Examination of Hofstede’s six cultural dimensions within the context of European corporate acquisitions.
- Assessment of how corporate governance standards in the acquirer's country impact deal outcomes.
- Empirical study using cumulative abnormal returns (CARs) for a large sample of EU transactions from 2001 to 2016.
Excerpt from the Book
1.1 Background and Problem Statement
The Franco-Dutch airline Air France–KLM is the result of a cross-border merger that occurred in 2004 between Air France and KLM, which became a large player in the global airline business. The incentives for this merger were the economic recession, the increase of low-cost carriers (e.g. Ryanair), and the worldwide overcapacity in terms of airlines and flights offered. The results of this merger are opportunities for cost saving, rescheduling of routes, and an improved use of the airline fleet. In order to make the merger work, a strategic plan was created that both parties needed to follow and execute. Due to the merger, synergies were achieved by integrating business areas where possible and experiences from both sides were used as a learning tool to integrate in other areas. In order to bridge the cultural differences between the Dutch and the French side, cultural bridging session programs were set up to share thoughts and to monitor constantly. The cultural program eventually resulted in a complete working manual written by managers from both the French and the Dutch side. This is an example of a successful cross-border merger between two European countries that overcame the cultural, economic, and political differences between the two countries. Therefore, this thesis will focus on the success of cross-border mergers and acquisitions between countries with different cultures.
Summary of Chapters
1 INTRODUCTION: This chapter introduces the topic, provides the problem statement regarding cross-border M&A success in the EU, and outlines the thesis structure.
2 THEORETICAL FRAMEWORK: This section reviews literature on M&A motives, barriers such as cultural/legal/political differences, and defines the measures for cultural distance and corporate governance.
3 RESEARCH DESIGN: This chapter develops the research hypotheses, details the data sampling process, and defines the methodology including the event study approach and OLS regression analysis.
4 EMPIRICAL RESULTS: This section presents the regression estimates of the effect of cultural differences, legal origin, trust, Hofstede's dimensions, and corporate governance on bidder CARs, including robustness checks.
5 CONCLUSION AND LIMITATIONS: The final chapter summarizes the findings, concludes that the hypotheses were largely rejected, and addresses the study's limitations as well as suggestions for future research.
Keywords
Cross-border M&As, European Union, Bidder announcement returns, Cultural distance, Corporate governance, Shareholder wealth, Legal origin, Trust, Hofstede’s dimensions, Event study, OLS regression, Synergies, Market integration, Bidder characteristics, Financial performance.
Frequently Asked Questions
What is the core focus of this research?
The research examines whether cross-border mergers and acquisitions are more successful for acquiring firms in the European Union when the target and acquirer originate from culturally similar countries.
What are the primary thematic areas covered?
The study covers cultural distance, legal origin, institutional trust, Hofstede’s cultural dimensions, and corporate governance measures as factors affecting shareholder wealth in international M&A.
What is the central research question?
The primary research question is: "Are cross-border M&As more successful between culturally similar countries in the EU?"
Which scientific methodology is employed?
The author uses an event study methodology to calculate cumulative abnormal returns (CARs) for acquiring firms, followed by multivariate OLS regression analysis to test the impact of various cultural and institutional variables.
What does the main body of the work address?
The main body establishes a theoretical framework for M&A barriers, describes the research design and hypothesis development, and presents detailed empirical results through regression models.
Which keywords characterize this paper?
Key terms include Cross-border M&As, European Union, Bidder CARs, Cultural distance, Corporate governance, and Shareholder wealth.
How does the author define the "business stealing effect"?
The author explains it as the strategic response where an incumbent firm loses sales volume when a new competitor enters the market, which can influence M&A activity in integrated economies.
What role does the "top-tier advisor" variable play in the analysis?
It is used as a control variable to determine if the involvement of a reputable investment bank impacts the bidder's announcement returns.
What did the author conclude regarding the "cultural distance" hypothesis?
The evidence was mixed; while geographical distance showed significant results, the broader findings led to the conclusion that cross-border M&As are not definitively more successful between culturally similar countries in the EU.
- Arbeit zitieren
- Cheyenne Wijnant (Autor:in), 2017, Are cross-border Mergers and Acquisitions more successful between culturally similar countries in the EU?, München, GRIN Verlag, https://www.grin.com/document/376711
