Determinants of the share of equity sought in cross-border acquisitions

The extent of ownership in foreign market entry is an important topic in the entry mode literature. Yet the determinants of the share of ownership sought in cross-border acquisitions (CBAs) have not received much research attention. Drawing on multiple theoretical explanations, we develop and test h...

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Bibliographic Details
Published in:Journal of international business studies 2009-10, Vol.40 (8), p.1277-1297
Main Authors: Chari, Murali DR, Chang, Kiyoung
Format: Article
Language:English
Subjects:
Acquisitions
Acquisitions & mergers
Business and Management
Business Strategy/Leadership
Business studies
Costs
Cross border transactions
Equity
Equity stake
Hypotheses
International Business
International market
Investigations
Management
Market entry
Market share
Multinational corporations
Multinational enterprises
Organization
Studies
U.S.A
Valuation
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Summary:The extent of ownership in foreign market entry is an important topic in the entry mode literature. Yet the determinants of the share of ownership sought in cross-border acquisitions (CBAs) have not received much research attention. Drawing on multiple theoretical explanations, we develop and test hypotheses on factors influencing the share of equity sought by foreign firms in CBAs. Findings based on a sample of CBAs by US firms show that the share of equity sought is influenced by many factors, including the cost of valuing local firm assets, difficulty in integrating local firm managers in culturally distant countries, the cost of separating desired assets from the rest of the local firm, and the cost of resource commitment under exogenous uncertainty.
ISSN:0047-2506
1478-6990
DOI:10.1057/jibs.2008.103