The cost of pride: Why do firms from developing countries bid higher?

By Ole‐Kristian Hope, Wayne B. Thomas, Dushyantkumar Vyas. 2011

188 citations recorded by the source corpus.

Using an extensive panel of cross-border M&A transactions between 1990 and 2007, we find that firms from developing countries, compared with those from developed countries, bid higher on average to acquire assets in developed countries. We are interested in why these higher bids occur. We find that bids of firms from developing countries are higher in cases where the transaction displays “national pride” characteristics, where national pride is identified through a manual examination of media articles. These results, which are robust to numerous specifications (including alternative measures of national pride) and control variables, are both statistically and economically significant, and highlight a source of pride beyond personal hubris that potentially influences corporate decision-makers.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/a1eee1e5bb19b3a884de295f20229c4e165762cb

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In Accounting

1. Mike W. Peng
2. Igor Filatotchev
3. Mike Wright
4. R. Hoskisson
5. En Xie
6. K. Meyer
7. Ajai S. Gaur
8. T. Kostova

In Finance

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3. P. Brockman
4. Rejie George
5. Mike W. Peng
6. Mukesh Kumar
7. Mike Wright
8. Ajai S. Gaur

Citations in the corpus

• Institutions and the performance of politically connected M&As (2013, background): “As argued by Jensen and Ruback (1983), M&As decisions are often the most consequential investing decisions faced by senior managers.”
• Emerging multinationals from mid-range economies: the influence of institutions and factor markets (2013, background): “The fact that when bidding for the same targets, rival bidders from developed economies back off but emerging multinationals keep increasing the offer price is indicative of potentially elevated levels of managerial hubris (some of which may be coated by national pride) (Hope et al., 2011).”
• Internationalization and performance: A contextual analysis of Indian firms (2013, background): “A recent study by Hope, Thomas, and Vyas (2011) documents that firms from emerging markets bid higher for developed country targets—as the bid projects national pride—compared to firms from developed markets acquiring other developed country targets, which potentially raises the costs associated…”
• The global strategy of emerging multinationals from China (2012, unknown): “This pattern of China's OFDI speaks volumes about the negative role played by the Chinese government in terms of its discrimination against certain domestic firms, especially nonstate-owned ones (Ahlstrom, Chen, and Yeh, 2010; Huang, 2003).”
• Mergers and acquisitions in and out of emerging economies (2015, background): “Hope, Thomas, and Vyas (2011) propose an interesting new perspective on cross-border acquisitions made by firms from EE in DE.”
• A systematic approach to conducting review studies: An assessment of content analysis in 25years of IB research (2017, methodology): “First, we want to demonstrate the application of content analysis for conducting review studies. Second, we want to assess the methodological rigor in using content analysis in the IB literature. Towards this end, we selected eight IB journals that have a ranking of three or above based on ABS (Asso”
• Escaping the iron cage: Liabilities of origin and CSR reporting of emerging market multinational enterprises (2017, background): “…in several empirical studies, including at least two articles that were recently published in the Journal of International Business Studies (i.e., Hope et al, 2011; Lu, Liu, Wright, & Filatotchev, 2014) and others, including: Ramamurti (2012), Mathews (2006), and Sauvant, Economou, Gal, Lim, and…”