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Determinants of the share of equity sought in cross-border acquisitions

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  • Murali DR Chari

    (School of Business and Economics, Indiana University South Bend, South Bend, USA)

  • Kiyoung Chang

    (School of Business and Economics, Indiana University South Bend, South Bend, USA)

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    Abstract

    The extent of ownership in foreign market entry is an important topic in the entry mode literature. Yet the determinants of the share of ownership sought in cross-border acquisitions (CBAs) have not received much research attention. Drawing on multiple theoretical explanations, we develop and test hypotheses on factors influencing the share of equity sought by foreign firms in CBAs. Findings based on a sample of CBAs by US firms show that the share of equity sought is influenced by many factors, including the cost of valuing local firm assets, difficulty in integrating local firm managers in culturally distant countries, the cost of separating desired assets from the rest of the local firm, and the cost of resource commitment under exogenous uncertainty.

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    Bibliographic Info

    Article provided by Palgrave Macmillan in its journal Journal of International Business Studies.

    Volume (Year): 40 (2009)
    Issue (Month): 8 (October)
    Pages: 1277-1297

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    Handle: RePEc:pal:jintbs:v:40:y:2009:i:8:p:1277-1297

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    Cited by:
    1. De Beule, Filip & Elia, Stefano & Piscitello, Lucia, 2014. "Entry and access to competencies abroad: Emerging market firms versus advanced market firms," Journal of International Management, Elsevier, Elsevier, vol. 20(2), pages 137-152.
    2. Piscitello , Lucia & Rabellotti , Roberta & Scalera , Vittoria Giada, 2014. "Chinese and Indian M&As in Europe: The relationship between motive and ownership choice," CIRCLE Electronic Working Papers, Lund University, CIRCLE - Center for Innovation, Research and Competences in the Learning Economy 2014/3, Lund University, CIRCLE - Center for Innovation, Research and Competences in the Learning Economy.
    3. Malhotra, Shavin & Sivakumar, K. & Zhu, PengCheng, 2011. "Curvilinear relationship between cultural distance and equity participation: An empirical analysis of cross-border acquisitions," Journal of International Management, Elsevier, Elsevier, vol. 17(4), pages 316-332.
    4. Lai, Jung-Ho & Chen, Li-Yu & Chang, Shao-Chi, 2012. "The board mechanism and entry mode choice," Journal of International Management, Elsevier, Elsevier, vol. 18(4), pages 379-392.
    5. Stefano Elia & Lucia Piscitello & Sergio Mariotti, 2013. "Industrial Districts, Core Cities And Ownership Strategy Of Multinational Firms Investing In Italy," ERSA conference papers ersa13p27, European Regional Science Association.
    6. Li, Ji & Chu, Chris W.L. & Wang, Xinran & Zhu, Hong & Tang, Guiyao & Chen, Yuanyi, 2012. "Symbiotic ownership, cultural alignment, and firm performance: A test among international strategic alliances," International Business Review, Elsevier, Elsevier, vol. 21(6), pages 987-997.
    7. Ang, James & Knill, April & Mauck, Nathan, 2014. "Investment Opportunity Sets of Real Assets: An International Empirical Study Based on Ownership Types," MPRA Paper 53359, University Library of Munich, Germany.

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