The Impact of International Mergers and Acquisitions on Rivals’ Performance: The Role of Formal and Informal Institutions

Dimitrija Kalanoski, Francesco Cappa, Michele Pinelli and Jean-Philippe Bonardi

Journal of World Business, 2025, vol. 60, issue 3

Abstract: The article examines how firms' institutional environments influence rivals' expected performance following horizontal M&A announcements of competitors. Grounded in institutional economics, we propose that institutional distance affects M&As' economic efficiency by influencing deal completion and creating subsequent differential costs and benefits post-deal completion. Our analysis of 124 international M&A announcements reveals that rivals’ performance is negatively affected by negative formal institutional distance between the acquirer and target, but positively affected by negative formal distance between the rival and acquirer. In addition, informal institutional distance between the acquirer and target has positive effect on rivals’ performance—though this effect vanishes for high-status acquirers.

Keywords: M&A; Formal Institutions; Informal institutions; Rivals; Expected performance; Event-study; Stock market performance (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1016/j.jwb.2024.101608

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