The announcement effect of cross-border acquisitions by UK-firms in developed vs. developing countries: the moderating effect of cultural distance.

Abstract: This study examines the influence of host country economic development and cultural distance on the creation of firm value by UK-based firms through cross-border acquisitions, analyzing the announcement effect. To assess the announcement effect, the cumulative abnormal returns (CAR) of a seven-day trading window around the announcement date are used. The sample consists of 839 acquisitions by 280 firms in 41 countries from 1997-2019. The results show that more value is created when acquiring a target firm from a developing country and cultural distance negatively influences value creation. Further research is required to investigate if cultural distance has a moderating effect on the relationship between host country economic development and value creation.