International Deal Experience and Cross‐Border Acquisitions

Abstract

I show that corporate directors' human capital facilitates international investments. Directors' experience with cross‐border transactions positively influences firms' decisions to conduct their first cross‐border acquisitions. Cross‐border acquirers are more likely to buy firms headquartered in countries with which the directors have prior deal experience. This effect is strongest for target firms headquartered in culturally and institutionally dissimilar countries. Announced cross‐border acquisitions are received more favorably by financial markets and are more likely to be completed successfully when the announcing firm has a director with cross‐border acquisition experience. These effects are not driven by investment bank involvement in the deal process or by other forms of directors' human capital, and they are robust to endogeneity of director hires.

JEL Classification: F23, F21, J24, L23