Impact of Institutional and Cultural Differences on the Performance of Cross-Border M&As by Companies from BRICS Countries

The number of cross-border M&As significantly increased in the last 10 years due to globalization and integration of world markets. Also, the share of cross-border deals involving emerging markets is considerably growing nowadays. However, some deals are inefficient for acquirer. More than a half of inefficient cross-border M&As are explained by institutional and cultural distances between countries. The primary objective of this study is to examine the difference in influence of institutional and cultural distances between countries in case when target-company is from emerging market, and when it is from developed market. We examine 200 deals initiated by companies from BRICS countries, where target-companies are situated in the developed USA market or in other BRICS emerging markets, during the period from January 2000 till January 2016. Our empirical results are: (1) average cross-border M&A, where acquirer is situated in emerging market, is efficient for acquirer, (2) deals are more efficient when targets are located in BRICS countries, (3) institutional and cultural distances between countries decrease an efficiency of cross-border M&As, and (4) if target-company is from the USA, the negative influence of these factors on the performance will be bigger.