The concurrent impact of cultural, political, and spatial distances on international mergers and acquisitions

This article explores the concurrent effects of cultural, political, and spatial distances on M&A flows occurring between any two countries belonging to the whole European Union (27 States) or to the European Neighbours group (16 States) over the period 2000-2011. In the econometric analysis, based on zero-inflated models, we simultaneously estimate the probability of engaging in a cross-border M&A and the intensity of the deals. This allows us to adequately model the two different mechanisms which may result in the absence of deals in the cross-border bilateral M&A transactions. The absence of deals may be due to either the lack of any transactions or unsuccessful negotiations. Taking into account the effect of population, gross domestic product, technological capital, financial conditions and quality of the institutions, we find robust evidence that the multi-dimensional distance between two countries negatively affects both the probability and the intensity of M&A deals.