Can Firms Learn by Observing? Evidence from Cross-Border M&As
Journal of Corporate Finance, Volume 25, April 2014: 202–215
42 Pages Posted: 7 Oct 2014
Date Written: July 9, 2014
In the presence of high uncertainty and limited experience, can observing the actions of other acquiring predecessors help firms make better acquisition decisions? Using a sample of cross-border M&As conducted by US acquirers in developing countries, we document a positive and significant relationship between an acquirer’s performance and its predecessors’ acquisition activity. This relationship is especially pronounced in the prevalence of news events about the outcome of predecessors’ acquisitions, when predecessors consist of US peers from the same industry and/or when targets are based in culturally distant countries. Our findings shed light on one channel through which information spillovers across industries and acquiring firms could be a key driver of value creation in developing market cross-border M&As.
Keywords: learning, observing, cross-border M&As, performance
JEL Classification: D23, D83, G14, G32, G34
Suggested Citation: Suggested Citation