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Does religion affect cross-border acquisitions? Tales from developed and emerging economies

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  • Prasadh, R. Shyaam
  • Thenmozhi, M.

Abstract

This article examines how religious distance and religious freedom influence cross-border acquisition (CBA) activity and firm's choice of control.Using a global sample of 75,151 CBAs across 45(57) acquirer (target) countries over a period of 34 years from 1980 to 2014, we find that the CBA volume is lower with firms preferring partial control when countries are religiously distant. We use three different constructs to examine the role of religious freedom. Our findings show that government favoritism and social regulations reduce the CBA volume whereas state regulations on religion drive CBA volume. In addition, firms opt for full control when countries exhibit higher government favoritism and lower state regulations on religion. We also demonstrate that internationalization decisions depend on the country of origin. Finally, we find that acquirers with a foothold in the target mitigate the information asymmetry associated with religious distance.

Suggested Citation

  • Prasadh, R. Shyaam & Thenmozhi, M., 2019. "Does religion affect cross-border acquisitions? Tales from developed and emerging economies," Finance Research Letters, Elsevier, vol. 31(C).
    • Handle: RePEc:eee:finlet:v:31:y:2019:i:c:s1544612318307827
    DOI: 10.1016/j.frl.2018.11.022
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    Cited by:

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    2. Du, Weijian & Fan, Yuhuan & Liang, Sunfan & Li, Mengjie, 2023. "The power of belief: Religious traditions and rent-seeking of polluting enterprises in China," Finance Research Letters, Elsevier, vol. 54(C).
    3. Shyaam Prasadh & M. Thenmozhi & May Hu, 2020. "Does economic freedom distance affect long-run post-acquisition performance and ownership level in cross-border acquisitions?," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 47(2), pages 191-213, June.
    4. Yugang He, 2024. "Artificial intelligence and religious freedom: divergent paths converging on economic expansion," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-12, December.
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    6. Zhang, Yuanyuan & Sun, Wenli & Du, Yaning, 2024. "Lingua franca proficiency and cross-border mergers and acquisitions: Language matters," Finance Research Letters, Elsevier, vol. 66(C).

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    More about this item

    Keywords

    Cross border acquisitions; Religious distance; Religious freedom; Entry mode; Emerging markets; Ownership structure;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • Z12 - Other Special Topics - - Cultural Economics - - - Religion
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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