Review of Corporate Finance > Vol 2 > Issue 2

The Effect of Corporate Investment Efficiency on Cross-Border M&As

Feng Dong, Department of Finance, Siena College, USA, , John Doukas, Department of Finance, Old Dominion University, USA,
Suggested Citation
Feng Dong and John Doukas (2022), "The Effect of Corporate Investment Efficiency on Cross-Border M&As", Review of Corporate Finance: Vol. 2: No. 2, pp 235-294.

Publication Date: 30 May 2022
© 2022 F. Dong and J. Doukas
Corporate finance
JEL Codes: G15, G31, G34
Cross-border mergers and acquisitionsinvestment efficiencyqualitative comparative analysis


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In this article:
Literature Review and Hypothesis Development 
Methodology and Data 


This paper examines whether the heterogeneity of US acquirers’ corporate investment efficiency plays a key role in the observed performance variation of cross-border mergers and acquisitions (CBM&As). We find acquirers with attributes of high investment efficiency realize significantly higher shareholder gains than the deals carried out by low–investment efficiency acquirers. We also find that the inferior performance of CBM&As reported in earlier studies is mainly driven by the strong chief executive officer (CEO) dismissal risk incentives of low–investment efficiency acquirers. Moreover, the likelihood of CEO turnover decreases (increases) significantly if the CBM&As succeed (fail). High-investment-efficiency cross-listed US acquirers in the foreign target’s capital market realize significantly greater returns than their low-investment-efficiency counterparts. Finally, using a qualitative comparative analysis methodology, we further find that high–investment efficiency acquirers strongly prefer foreign targets with salient intangible assets and low acquisition value. US acquirers of low investment efficiency, though, focus only on low-cost international targets.