Religion, risk aversion, and cross border mergers and acquisitions

We study the relation between religiosity (a measure of the strength of a country’s religious belief) and cross-border mergers and acquisitions. We find that acquirers from more religious countries conduct fewer and smaller cross-border merger transactions and, when they do, they pay less, and a smaller proportion of their payment is in the form of cash (as opposed to stock). Having a greater proportion paid by stock effectively binds targets to the acquirer’s post-merger risks. Our results suggest that a country’s religiosity may closely proxy the aversion to risk of its companies’ directors and executives. We also show (with a few minor exceptions) that a country’s primary religion such as Catholicism, Protestantism, and Buddhism, tends not to have a bearing on the cross-border merger transactions, method of payment, or premium, after accounting for the degree of religiosity.