Institutional Distance and Free Trade Agreements in the Context of Cross-border M&A Performance

Abstract

This paper contributes to the understanding of cross-border M&A performance, by employing a multilevel view of institutional distance. While prior research has focused mostly on select institutional distance variables such as cultural distance, we use a multi-faceted approach, employing both formal and informal institutional distance variables to the context of cross-border M&A performance. Furthermore, our paper introduces Free Trade Agreements as a new supra-national variable, adding nuance to the multi-level view of institutional distance. Specifically, we test whether formal and informal distance variables affect cross-border M&A performance and whether Free Trade Agreements are able to mitigate the effects of formal and informal institutional distance on cross-border M&A performance. Our findings indicate partial empirical support for the former and no empirical support for the latter.