Trust asymmetry and cross-border merger withdrawals: a global perspective

We empirically examine how trust asymmetry between countries can impact the cross-border merger outcome. Differing trust perceptions between acquirer and target countries can increase the complexities of deal negotiations and integration, constraining the successful deal completion and outcome. We find, in a comprehensive global sample of 56 countries spanning 37 years, that higher trust asymmetries between the acquirer and target countries significantly increases the cross-border merger withdrawal intensity and reduces the expected synergy gains. Moreover, the adverse effects of trust asymmetry are significantly attenuated by the quality of institutions in both countries. Our results hold after employing various empirical techniques to address endogeneity, omitted variable bias, and reverse causality. Overall, this study highlights the importance of trust asymmetry in shaping global economic outcomes.