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The Effect of Corporate Investment Efficiency on Cross-Border MAs

Author

Listed:
  • Feng Dong
  • John Doukas

Abstract

This paper examines whether the heterogeneity of US acquirers’ corporate investment efficiency plays a key role in the observed performance variation of cross-border mergers and acquisitions (CBM&As). We find acquirers with attributes of high investment efficiency realize significantly higher shareholder gains than the deals carried out by low–investment efficiency acquirers. We also find that the inferior performance of CBM&As reported in earlier studies is mainly driven by the strong chief executive officer (CEO) dismissal risk incentives of low–investment efficiency acquirers. Moreover, the likelihood of CEO turnover decreases (increases) significantly if the CBM&As succeed (fail). High-investment-efficiency cross-listed US acquirers in the foreign target’s capital market realize significantly greater returns than their low-investment-efficiency counterparts. Finally, using a qualitative comparative analysis methodology, we further find that high–investment efficiency acquirers strongly prefer foreign targets with salient intangible assets and low acquisition value. US acquirers of low investment efficiency, though, focus only on low-cost international targets.

Suggested Citation

  • Feng Dong & John Doukas, 2022. "The Effect of Corporate Investment Efficiency on Cross-Border MAs," Review of Corporate Finance, now publishers, vol. 2(2), pages 235-294, May.
    • Handle: RePEc:now:jnlrcf:114.00000015
    DOI: 10.1561/114.00000015
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    Cited by:

    1. Chen, Sheng-Syan & Ho, Keng-Yu & Ho, Po-Hsin & Nie, Wei-Ying, 2022. "CEO overconfidence and bondholder wealth effects: Evidence from mergers and acquisitions," Journal of Corporate Finance, Elsevier, vol. 77(C).
    2. 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.

    More about this item

    Keywords

    Cross-border mergers and acquisitions; investment efficiency; qualitative comparative analysis;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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