International Journal of Business and Economics Volume 7, No. 2 August, 2008

Cross-Border M&A: Cultural Disparities and the Associated Wealth Effects

Fang (Helga) He

Department of Management, Southern Illinois University—Carbondale, U.S.A.

Feng-Shun (Leo) Bin

Department of Business Administration, University of Illinois at Springfield, U.S.A.

Dar-Hsin Chen

Department of Business Administration, National Taipei University, Taiwan

Abstract

This study employs event-study methodologies to examine the stock price behaviors of US target firms surrounding the 1996–2005 cross-border M&A events related to corporate offers. We further apply factor analysis with country fixed-effect specifications to identify the determinants that may significantly contribute to the abnormal stock performance associated with cross-border M&A. While the sample target firms are all headquartered in the US, the foreign corporate bidders are grouped into various subsamples based on their countries of origin and presumably distinct cultures. Our evidence suggests that cultural disparities could play an important role in determining stock price performance around M&A public offer announcements.

Keywords：M&A, cultural disparities, event studies, wealth effects.

JEL Classifications：F21, G15, G34.

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