Do geographic distances proxy a high probability of foreign divestment? Evidence from Japanese multinational firms

Author:

Jiang Yanwen1ORCID,Noma Mikiharu1

Affiliation:

1. Graduate School of Business Administration Hitotsubashi University Tokyo Japan

Abstract

AbstractWe aim to provide an unambiguous explanation for the positive influence of the geographic distance between a firm's home and host country on divestment decisions of Japanese multinational firms’ outbound merger and acquisition (M&A). Our analysis of 868 acquisitions made by 496 firms in 45 countries and regions from 2005 to 2015 highlights the importance of drawing a clear distinction among various foreign divestment motives before inferring the impact of geographic distances rashly, especially whether it is failure‐driven or global business strategy‐driven. We further find that its impact hinges on parent firm‐ and deal‐level attributes, that is, geographic distance is less salient for large firms, young firms, and foreign operations under a complete control mode; however, the opposite was the case for firms with a high debt burden.

Publisher

Wiley

Subject

General Economics, Econometrics and Finance,Accounting

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