Interplay of cross-country distance with cross-border M&A performance: an institutional perspective

Abstract

Purpose This study aims to examine the impact of home–host country distance on the cross-border mergers and acquisitions performance. Design/methodology/approach The results of this study are based on a final sample of 483 completed cross-border deals involving BRICS nation acquirers and targets spread across a set of 27 nations. While controlling for prior experience, among other factors, the impact of nine institutional distance dimensions on deal performance is examined. Cumulative abnormal returns calculated over the select event windows are used as a measure of deal performance. Findings The results of this study validate the explanatory power of cross-country distance and exhibit that financial and cultural distance exert a negative influence on deal performance, whereas political and global connectedness distance positively impacts performance. Interestingly, geographic distance is not found to be related to performance outcomes. Research limitations/implications The results of this study caution against possible aggregation of the cross-country distance measure and point towards the need to acknowledge and analyse the multi-dimensional nature of distance. Practical implications The results of this study are expected to aid managers in devising internationalisation strategies and target selection, maximising their performance and shareholder wealth. Originality/value This study contributes to the knowledge of internationalisation and cross-country distance. It presents as one of the first to investigate the impact of institutional distance on deal performance using a substantially large multi-country emerging market data set.