The Determinants of Cross-border M&As: the Role of Institutions and Financial Development in Gravity Model

This paper examines the macroeconomic determinants of cross border M&As. Using a panel data set of bilateral M&A deal values for 101 countries and 17 years ranging from 1989 to 2005, we investigate both home and host country factors that may play an important role in determining the size and direction of M&A flows. Overall, the empirical results suggest that legal and institutional quality and financial market development increase M&A volume across countries. The significant effect of institutions however, may disappear for transactions between countries of the similar stage of the development.