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Student
Title
Supervisor
Faculty
Educational Programme
Final Grade
Year of Graduation
Arina Iashukhina
Country-specific Determinants of Target Premiums in Cross-Border Mergers and Acquisitions
Corporate Finance
(Master’s programme)
2019
This paper focuses on assessing the impact of country differences between companies participating in cross-border M&A transactions on target premiums. Prior literature assumes a symmetric negative impact of institutional differences in a given country pair without taking into account different quality of institutions in developed and developing countries. However, controversial and unstable results of these studies question the correctness of this assumption and suggest asymmetric effects of country differences on premiums paid for targets from developed countries and premiums paid for targets from developing countries.

In this paper we develop a comprehensive system of cross-country indicators based on five separate institutional categories: economic, political, investment, cultural and geographical. Based on the developed model, we test hypotheses on asymmetric impact of country differences on premiums paid for targets from developed countries and premiums paid for targets from developing countries. The results show that, depending on the specific direction of transactions, economic, political, investment and cultural distances can play a differential role in forming expectations regarding potential synergies, thus, resulting a various effect on target premiums valuation.

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