Political affinity and investors' response to the acquisition premium in cross-border M&A transactions — A moderation analysis

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

3 Scopus Citations
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Author(s)

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Detail(s)

Original languageEnglish
Pages (from-to)2477-2492
Journal / PublicationStrategic Management Journal
Volume42
Issue number13
Online published20 Jul 2021
Publication statusPublished - Dec 2021

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Abstract

This article investigates the moderating effect of political affinity between countries on investors' reactions to the premium in cross-border acquisitions (CBAs). Based on a sample of 1,183 CBAs between 1999 and 2018, we find that political affinity positively moderates the relationship between the acquisition premium and the acquiring and target firms' stock market return. We argue that investors use political affinity to assess the reliability of the premium (i.e., management's overall perception of a given deal's synergistic potential). This is in line with prior literature reasoning that, unlike strong political affinity, weak political affinity increases the likelihood of government intervention, decreases the likelihood of deal completion, and results in higher premiums to mitigate the previous effects, thus potentially increasing the likelihood of value destruction.

Research Area(s)

  • acquisition premium, cross-border mergers and acquisitions, investor reaction, moderation analysis, political affinity

Bibliographic Note

Full text of this publication does not contain sufficient affiliation information. The Research Unit(s) information for this record is based on the then academic department affiliation of the author(s).

Citation Format(s)

Political affinity and investors' response to the acquisition premium in cross-border M&A transactions — A moderation analysis. / Fieberg, Christian; Lopatta, Kerstin; Tammen, Thomas; Tideman, Sebastian A.

In: Strategic Management Journal, Vol. 42, No. 13, 12.2021, p. 2477-2492.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review