Climate theory can impact managerial decisions on cross-border mergers
Did you know that your climate can impact not only your decisions as a manager but also your business partnerships, mergers, and acquisitions?
A recent study by The Business School highlights a new approach to identifying a familiar country within the context of cross-border mergers and acquisitions. Managers select overseas target firms in countries with relatively little distance to minimize frictions following merger announcements.
As shown in the literature, temperature has a significant impact on our behavior and decisions. For example, temperature influences our appearance, how we dress, our daily activities such as the magnitude of physical activity, interactions with others, and our preferences towards risk. We find that the absolute distance in average temperature between two countries serves as a good proxy for familiarity, demonstrating that countries with similar temperatures tend to exhibit comparable characteristics, thereby facilitating more mergers and acquisitions.
Temperature distance offers significant advantages compared to previous measures of country familiarity, such as culture, shared language, and religion. Temperature is a continuous variable that captures the full magnitude of the relationship and can be easily estimated from data available in online resources for all countries around the world.
If you are interested in learning more about the research or how it can be applied, please refer to the paper below and/or contact Professor Antonios Siganos for the estimated absolute temperature distances between all country pairs. These estimations could be applied to various international contexts beyond cross-border mergers and acquisitions.
Siganos, A. (2024). Climate theory & managerial decisions on cross-border mergers. British Accounting Review, 56(1), Article 101260. https://doi.org/10.1016/j.bar.2023.101260