Abstract
We investigate the role of social connectedness in cross-border mergers and acquisitions (M&As) using the Facebook social connectedness index. We show that stronger social connectedness between countries leads to higher announcement returns for acquirers in cross-border M&As. This effect is attributed to improved information dissemination, which reduces target premiums, increases deal completion likelihood, and supports acquirers to achieve long-term success. Furthermore, social connectedness increases the frequency and dollar value of cross-border M&As between countries. This relation is weaker for countries in the same customs union, but stronger in the presence of greater political disagreement or significant time zone differences. Extending our analysis to domestic M&As in the U.S., we find that social connectedness between the headquarters’ cities of acquirers and targets improves acquirers’ announcement returns.
Original language | English |
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Article number | 101582 |
Journal | Journal of Empirical Finance |
Volume | 81 |
Early online date | 16 Jan 2025 |
DOIs | |
Publication status | E-pub ahead of print - 16 Jan 2025 |
Acknowledgements
We are grateful for the helpful comments from Woon Sau Leung, Zhehao Jia, Yupu Zhang, and Zhiwei Hao. We are grateful for the comments from the discussants and participants at the EAA Bergen 2022 and AIB Miami 2022 Conferences.Funding
This research did not receive any specific grant from funding agencies in the public, commercial, or non-profit sectors.