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| Author: | Kengelbach, J. Schwetzler, B. Sperling, M.O. |
| Title: | How does geographical and legal proximity affect the performance of M&A transactions? |
| Journal: | Journal of General Management
2010 : SPRING, VOL. 35:3, p. 81-97 |
| Index terms: | law geography mergers |
| Freeterms: | transactions |
| Language: | eng |
| Abstract: | Geographical distance and legal environment are important factors in cross-border transactions. This article examines the impact of geographical and legal proximity on the performance of mergers and acquisitions (M&A) transactions. The result reveals that capital market reactions for targets in Asia Pacific are only about half compared to those in North America or Europe. It was also found that target firms under-perform in transactions with neighbouring countries. Acquirers pay less for firms that are close to their own market. The evidence presented in this article (weakly) supports the view that after transaction, acquiring firms bootstrap superior governance mechanisms of their targets. The study reveals that management of target firms in countries with weaker shareholder rights tends to accept offers too early, whereas the management of acquirers coming from a weaker legal system tends to overpay. |
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