Mitigating risk in international mergers and acquisitions: the role of contingent payouts

Jeffrey J Reuer, Oded Shenkar and Roberto Ragozzino
Additional contact information
Jeffrey J Reuer: Kenan-Flagler Business School, University of North Carolina, Chapel Hill, NC, USA
Oded Shenkar: Fisher College of Business, The Ohio State University, Columbus, OH, USA
Roberto Ragozzino: Fisher College of Business, The Ohio State University, Columbus, OH, USA

Journal of International Business Studies, 2004, vol. 35, issue 1, 19-32

Abstract: Previous internationalization studies have focused on the entry modes employed by multinational firms but have not considered the contractual heterogeneity that underlies each mode. It is important to examine these contractual details, as the firm may be able to obtain some of the benefits typically associated with one entry mode while selecting another. In the case of international mergers and acquisitions (M&As), a key contractual variable is whether the parties agree to a performance-contingent payout structure, which can mitigate the risk of adverse selection. In this paper, we examine the antecedents of contingent payouts in the form of earnouts and stock payments. The results indicate that firms lacking international and domestic acquisition experience turn to contingent payouts when purchasing targets in high-tech and service industries. Firms tend to avoid contingent payouts in host countries with problems with investor protection and legal enforceability. Journal of International Business Studies (2004) 35, 19–32. doi:10.1057/palgrave.jibs.8400053

Date: 2004
References: Add references at CitEc
Citations: View citations in EconPapers (83)

Downloads: (external link)
http://www.palgrave-journals.com/jibs/journal/v35/n1/pdf/8400053a.pdf Link to full text PDF (application/pdf)
http://www.palgrave-journals.com/jibs/journal/v35/n1/full/8400053a.html Link to full text HTML (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:jintbs:v:35:y:2004:i:1:p:19-32

Ordering information: This journal article can be ordered from
http://www.springer. ... nt/journal/41267/PS2

Access Statistics for this article

Journal of International Business Studies is currently edited by John Cantwell

More articles in Journal of International Business Studies from Palgrave Macmillan, Academy of International Business
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().