The Cost of Pride: Why Do Firms from Developing Countries Bid Higher?
University of Toronto - Rotman School of Management
Wayne B. Thomas
University of Oklahoma - Michael F. Price College of Business
University of Toronto - Rotman School of Management; University of Toronto at Mississauga
January 8, 2010
Using an extensive panel of cross-border M&A transactions between 1990 and 2007, we find that firms from developing countries (versus those from developed countries) bid higher on average to acquire assets in developed countries. We are interested in why these higher bids occur. We find that bids of firms from developing countries are higher in cases where the transaction displays “national pride” characteristics, where national pride is identified through a manual examination of media articles. These results, which are robust to numerous specifications (including alternative measures of national pride) and control variables, are both statistically and economically significant and highlight a source of pride beyond personal hubris which potentially influences corporate decision makers.
Number of Pages in PDF File: 48
Keywords: Mergers & Acquisitions, bid premium, national pride, emerging markets
JEL Classification: G12, G15, G24, G34, G32, O16, F23
Date posted: January 8, 2008 ; Last revised: January 11, 2010