Institutional Determinants of Ownership Stake in Intra-Africa Cross-Border Acquisitions

We extend current theory on the determinants of ownership stake in CBAs to the institutional context of South-South deals by explaining how te quality of historical ties between the firms’ home countries and socio-political... [ view full abstract ]

We extend current theory on the determinants of ownership stake in CBAs to the institutional context of South-South deals by explaining how te quality of historical ties between the firms’ home countries and socio-political factors within those countries play important roles. In particular, we focus on three institutional determinants of CBAs: shared colonial history, formal institutional distance, and ethno-linguistic fractionalization.  We find that shared colonial histories are positively related to ownership stake, whereas formal institutional distance and ethno-linguistic fractionalization of the acquirer’s home country are negatively related to ownership stake.  And, the negative effects of ethno-linguistic fractionalization on ownership stake are amplified when both the acquirer’s and target’s home country are highly fractionalized.