The Cost of Pride: Why Do Firms from Developing Countries Bid Higher?

Abstract Using an extensive panel of cross-border M&A transactions between 1990 and 2007, we find that firms from developing countries (versus those from developed countries) bid higher on average to acquire assets in developed countries. We are interested in why these higher bids occur. We find that bids of firms from developing countries are higher in cases where the transaction displays “national pride” characteristics, where national pride is identified through a manual examination of media articles. While other factors may also influence these higher bids, we find that the role of national pride is robust across a number of specifications and control variables. These results highlight a source of pride beyond personal hubris which potentially influences corporate decision makers.