The Cost of Pride: Why Do Firms from Developing Countries Bid Higher?

48 Pages Posted: 8 Jan 2008 Last revised: 11 Jan 2010

Ole-Kristian Hope

University of Toronto - Rotman School of Management

Wayne B. Thomas

University of Oklahoma - Michael F. Price College of Business

Dushyantkumar Vyas

University of Toronto - Rotman School of Management; University of Toronto at Mississauga

Multiple version iconThere are 3 versions of this paper

Date Written: January 8, 2010

Abstract

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.

Keywords: Mergers & Acquisitions, bid premium, national pride, emerging markets

JEL Classification: G12, G15, G24, G34, G32, O16, F23

Suggested Citation

Hope, Ole-Kristian and Thomas, Wayne B. and Vyas, Dushyantkumar, The Cost of Pride: Why Do Firms from Developing Countries Bid Higher? (January 8, 2010). Available at SSRN: https://ssrn.com/abstract=1081298 or http://dx.doi.org/10.2139/ssrn.1081298

Ole-Kristian Hope (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6
Canada

HOME PAGE: http://www.rotman.utoronto.ca/FacultyAndResearch/Faculty/FacultyBios/Hope.aspx

Wayne B. Thomas

University of Oklahoma - Michael F. Price College of Business ( email )

Michael F. Price College of Business,
307 W Brooks, Rm 212B
Norman, OK 73019
United States
405-325-5789 (Phone)
405-325-7348 (Fax)

Dushyantkumar Vyas

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6
Canada

University of Toronto at Mississauga ( email )

3359 Mississauga Rd N.
Mississauga, Ontario L5L 1C6
Canada

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