Do target-country legal institutions affect cross-border mergers and acquisitions? A quantitative literature survey

We undertake a meta-analysis of 1296 estimates of the effect of target-country legal environments on cross-border mergers and acquisitions (CBMAs) compiled from 60 published studies. Although these studies provide effect estimates that are statistically significant, none of the legal variables considered, save civil law, has an effect on either CBMA intensity or the CBMA premium that is large enough to be meaningful. Thus, the studies fail to provide support for legal origins theory or for theories based on cultural distance as explanations for CBMA activity. Studies of the CBMA premium are plagued by inadequate statistical power, by unexplained inter-study differences in effect and by publication-selection bias. Based on our meta-analysis, we suggest reasons why the empirical evidence fails to support theories that have wide acceptance.