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

Murali DR Chari and Kiyoung Chang
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Murali DR Chari: School of Business and Economics, Indiana University South Bend, South Bend, USA
Kiyoung Chang: School of Business and Economics, Indiana University South Bend, South Bend, USA

Journal of International Business Studies, 2009, vol. 40, issue 8, 1277-1297

Abstract: 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.

Date: 2009
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