The differential impact of quantitative and qualitative information on outbound cross-border acquisition outcomes: evidence from emerging economies

Abstract

Purpose

The purpose of this study is to examine the differential impact of qualitative and quantitative informational signals within the merger and acquisition (M&A) press releases on deal completion and duration. A significant percentage of deals by emerging market acquirers get abandoned before completion, and those that are completed have a longer duration. The limited information about the operations of acquirers from emerging markets creates suspicion among the stakeholders involved in deal resolution, hindering the completion of deals. Thus, using the signal-feedback paradigm, authors investigate how informational signals in the M&A press release impact the deal resolution.

Design/methodology/approach

The study employs content analysis on M&A press releases announced by firms from five emerging economies: Brazil, Russia, India, China and South Africa. The technique is applied based on the exploration-exploitation framework developed by March (1991) to categorize the announced deal motives (qualitative information). Next, the authors identify the percentage of relevant quantitative information disclosed in the press release, following which results are obtained using logistic and ordinary least square regressions.

Findings

The study reports that deals with declared exploratory motives take longer to complete. Additionally, deals disclosing higher percentage of quantitative disclosure exhibit lower completion rate and increased deal duration.

Originality/value

This is the first study to provide evidence that familiarity bias impacts deal duration as relative to exploitation deals that are familiar to the stakeholders; exploratory deals take longer to conclude. Further, our analysis indicates that a greater percentage of quantitative disclosure may not always reduce information risk but rather be interpreted negatively in the form of the acquirer’s overconfidence in the deal’s potential.

Citation

Ahuja, S., Singh, S. and Yadav, S.S. (2024), "The differential impact of quantitative and qualitative information on outbound cross-border acquisition outcomes: evidence from emerging economies", Review of Behavioral Finance, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/RBF-04-2023-0114