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The Concurrent Impact of Cultural, Political, and Spatial Distances on International Mergers and Acquisitions

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  • MC. Di Guardo
  • E. Marrocu
  • R. Paci

Abstract

The paper explores the concurrent effects of cultural, political, and spatial distances on M&A flows occurring between any two countries belonging to the whole European Union (27 States) or to the European Neighbors group (16 States) over the period 2000-2011 . By employing zero-inflated negative binomial specifications, entailing both a binary and count process, we adequately model the two different mechanisms which may generate zero observations in the cross-border bilateral deals. Zeros may be due to either the lack of any transactions or unsuccessful negotiations. We find robust evidence that the multi-dimensional distance between two countries negatively affects the probability that they will engage in M&A deals, while the recurrence rate of these deals is positively related to population, gross domestic product, and technological capital and negatively related to geographical distance.

Suggested Citation

  • MC. Di Guardo & E. Marrocu & R. Paci, 2013. "The Concurrent Impact of Cultural, Political, and Spatial Distances on International Mergers and Acquisitions," Working Paper CRENoS 201308, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    • Handle: RePEc:cns:cnscwp:201308
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    3. Ilya V. Naumov & Vladislav M. Sedelnikov, 2021. "Scenario modelling and forecasting of spatial transformation in the Russian catering market," Upravlenets, Ural State University of Economics, vol. 12(4), pages 75-91, September.
    4. Ronald B. Davies & Rodolphe Desbordes & Anna Ray, 2018. "Greenfield versus merger and acquisition FDI: Same wine, different bottles?," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 51(4), pages 1151-1190, November.
    5. Demidova, Olga, 2021. "Methods of spatial econometrics and evaluation of government programs effectiveness," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 64, pages 107-134.
    6. Demidova, Olga, 2014. "Spatial-autoregressive model for the two groups of related regions (eastern and western parts of Russia)," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 34(2), pages 19-35.
    7. Ilya V. Naumov & Vladislav M. Sedelnikov, 2021. "Interregional relationships in the Russian dairy market: Spatial growth poles," Journal of New Economy, Ural State University of Economics, vol. 22(3), pages 103-124, October.
    8. Jiawei Wu & Yehua Dennis Wei & Wen Chen, 2020. "Spatial proximity, localized assets, and the changing geography of domestic mergers and acquisitions in transitional China," Growth and Change, Wiley Blackwell, vol. 51(3), pages 954-976, September.
    9. Nils Ellwanger & Ron Boschma, 2013. "Who acquires whom? The role of geographical proximity and industrial relatedness in Dutch domestic M&As between 2002 and 2008," Papers in Evolutionary Economic Geography (PEEG) 1319, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Oct 2013.
    10. Sucharita Gopal & Joshua Pitts & Zhongshu Li & Kevin P. Gallagher & James G. Baldwin & William N. Kring, 2018. "Fueling Global Energy Finance: The Emergence of China in Global Energy Investment," Energies, MDPI, vol. 11(10), pages 1-25, October.
    11. Cristian Incaltarau & Ilkhom Sharipov & Gabriela Carmen Pascariu & Teodor Lucian Moga, 2022. "Growth and convergence in Eastern Partnership and Central Asian countries since the dissolution of the USSR—embarking on different development paths?," Development Policy Review, Overseas Development Institute, vol. 40(1), January.
    12. Federico Carril-Caccia & Aitor Garmendia-Lazcano & Asier Minondo, 2023. "Social ties and home bias in mergers and acquisitions," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 159(3), pages 563-593, August.
    13. Gaur, Ajai & Malhotra, Shavin & Zhu, PengCheng, 2022. "Institutional distance and ownership in foreign acquisitions," Journal of International Management, Elsevier, vol. 28(2).
    14. Xie, En & Reddy, K.S. & Liang, Jie, 2017. "Country-specific determinants of cross-border mergers and acquisitions: A comprehensive review and future research directions," Journal of World Business, Elsevier, vol. 52(2), pages 127-183.
    15. Ray, Anna, 2016. "Expanding Multinationals - Conglomerate M&A and Activity-Basket Proximity," Conference papers 332693, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    16. Barros, Victor & Verga Matos, Pedro & Miranda Sarmento, Joaquim & Rino Vieira, Pedro, 2022. "M&A activity as a driver for better ESG performance," Technological Forecasting and Social Change, Elsevier, vol. 175(C).
    17. Chandrika Raghavendra & Mahesh Rampilla & Venkata Ramana Thanikella & Isha Gupta, 2022. "Impact of Carbon Tax and Environmental Regulation on Inbound Cross-Border Mergers and Acquisitions Volume: An Evidence from India," IJFS, MDPI, vol. 10(4), pages 1-16, November.
    18. Juan Bu & Yinuo Tang & Yadong Luo & Chengguang Li, 2023. "Learning from inbound foreign acquisitions for outbound expansion by emerging market MNEs," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 54(5), pages 852-886, July.
    19. Myznikava, Katsiaryna (Katherine) & Farinha, Jorge, 2023. "The impact of political freedoms on cross-border M&A abandonment likelihood," The Quarterly Review of Economics and Finance, Elsevier, vol. 91(C), pages 112-138.

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    More about this item

    Keywords

    geographical distance; European Union; european neighboring countries; cultural and political distances; Cross-border M&As; zero-inflated models;
    All these keywords.

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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