Anchoring in international merger and acquisition equity decisions: evidence from Chinese firms

Purpose In uncertain environments, top managers may be inadvertently affected by the anchor information and make sticky decisions. The purpose of this paper is to examine how anchoring influences international merger and acquisition (M&A) equity decisions. Design/methodology/approach Based on the data of Chinese international M&A deals from 2007 to 2018, this paper uses the Tobit regression method to examine the anchoring effects on international M&A equity decisions. Findings The study shows that the acquiring firm's previous international M&A equity level as a self-generated anchor has a positive impact on the focal international M&A equity level. The local market's previous international M&A equity level as an externally provided anchor has a positive impact on the focal international M&A equity level. When there are self-generated anchors and externally provided anchors, the self-generated anchoring effect is stronger than the externally provided anchoring effect. The anchoring effect is stronger when the acquiring firm enters less stable host countries. Research limitations/implications - The acquirers in a single-country context may limit the generalizability of the results, and this study does not explicitly determine whether managers' decisions are unintentional or deliberate. Originality/value The study contributes to the discussion of equity-based foreign entry mode decisions by exploring anchoring behavior in strategic decisions. It provides an empirical investigation of the different anchoring effects and draws attention to the boundary conditions surrounding anchoring.