Long-Term Value Creation in Cross-Border Mergers and Acquisitions: The Role of Trust

57 Pages Posted: 5 Apr 2023

See all articles by Yunju Cha

Yunju Cha

National Chengchi University (NCCU)

Byung Hun Chung

Nanyang Business School, Nanyang Technological University

Jun-Koo Kang

Nanyang Business School, Nanyang Technological University

Date Written: April 5, 2023

Abstract

We examine whether trust between the citizens in an acquirer’s country and those in a target’s country improves long-term synergistic gains in cross-border M&As. We find that acquirers’ announcement returns increase as trust increases. The result is robust to using a historical war as an instrument for trust and French and German opposition to the U.S.-led invasion of Iraq as a shock to trust. Trust also positively affects combined firm returns and long-term stock and operating performance and employee retention in the post-M&A period. Long-term stock performance improvement is particularly higher when barriers to integration are greater.

Keywords: Cross-border M&A, Generalized trust, Announcement return, Long-term value, Synergistic gain, Post-M&A integration

JEL Classification: G14, G15, G34, G41

Suggested Citation

Cha, Yunju and Chung, Byung Hun and Kang, Jun-Koo, Long-Term Value Creation in Cross-Border Mergers and Acquisitions: The Role of Trust (April 5, 2023). Nanyang Business School Research Paper No. 23-08, Available at SSRN: https://ssrn.com/abstract=4410270 or http://dx.doi.org/10.2139/ssrn.4410270

Yunju Cha

National Chengchi University (NCCU) ( email )

No. 64, Chih-Nan Road
Section 2
Wenshan, Taipei, 11623
Taiwan

Byung Hun Chung

Nanyang Business School, Nanyang Technological University ( email )

Singapore, 639798
Singapore
+65 6790 4979 (Phone)

Jun-Koo Kang (Contact Author)

Nanyang Business School, Nanyang Technological University ( email )

Nanyang Avenue, Block S3-01b-54
Singapore, 639798
Singapore
(+65) 6790-5662 (Phone)
(+65) 6791-3697 (Fax)

HOME PAGE: http://www.nbs.ntu.edu.sg/nbs_corporate/divisions/bnf/index.asp

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