EXPRESS: Riding on Information-based Advantages: Business Group Affiliation and Cross-border Acquisition Completion

This study examines the impact of business group (BG) affiliation on the likelihood of completing cross-border acquisitions (CBAs). Drawing on information asymmetry theory, we hypothesize that BG-affiliated firms are more likely to complete CBA deals than standalone firms. Recognizing the role of formal and informal institutions in shaping information asymmetry in CBA transactions, we also investigate the contingent effects of regulatory quality distance (a formal institutional factor) and cultural distance (an informal institutional factor) on the above relationship. Our empirical analysis, based on a sample of 1293 CBA deals announced by Indian firms between 2000 and 2017, offers interesting insights. Specifically, we find that BG affiliation positively influences the likelihood of CBA completion and that regulatory quality distance between the home and host countries attenuates this effect. However, contrary to our expectations, cultural distance also attenuates the positive impact of BG affiliation on CBA completion, challenging the expectation that BG affiliation advantages would mitigate information asymmetry across all contexts. Thus, our study underscores the context-dependent nature of BG affiliation advantages, which are shaped by formal and informal institutional factors in CBAs.