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Social connectedness and cross-border mergers and acquisitions

Author

Listed:
  • Jiang, Zhonghao
  • Shi, Yukun
  • Xing, Lu

Abstract

We investigate the role of social connectedness in cross-border mergers and acquisitions (M&As) using the Facebook social connectedness index. We show that stronger social connectedness between countries leads to higher announcement returns for acquirers in cross-border M&As. This effect is attributed to improved information dissemination, which reduces target premiums, increases deal completion likelihood, and supports acquirers to achieve long-term success. Furthermore, social connectedness increases the frequency and dollar value of cross-border M&As between countries. This relation is weaker for countries in the same customs union, but stronger in the presence of greater political disagreement or significant time zone differences. Extending our analysis to domestic M&As in the U.S., we find that social connectedness between the headquarters’ cities of acquirers and targets improves acquirers’ announcement returns.

Suggested Citation

  • Jiang, Zhonghao & Shi, Yukun & Xing, Lu, 2025. "Social connectedness and cross-border mergers and acquisitions," Journal of Empirical Finance, Elsevier, vol. 81(C).
    • Handle: RePEc:eee:empfin:v:81:y:2025:i:c:s0927539825000040
    DOI: 10.1016/j.jempfin.2025.101582
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    More about this item

    Keywords

    Social connectedness; Cross-border M&As; Information dissemination;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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