2011, IGI Global, www.igi-global.com. Posted by permission of the publisher.

We incorporate the effects of culture to generalise existing gravity models of foreign portfolio investment (FPI). The inclusion of cultural identifiers in FPI originating and destination countries along with cultural distances between them is analogous to the inclusion of gravity and institutional strength variables for each country alongside geographical distances in standard gravity models of international trade in commodities, services and financial assets. Although intuitive, this has not been considered hitherto in gravity models of international trade within the international business, economics or finance literatures. We estimate our models of cross-border debt and equity FPI using panel regressions on the IMF’s CPIS survey for 174 originating and 50 destination countries from 2001 to 2007. We find that culture and cultural distance operate alongside geographic distance in determining global FPI patterns, and we find strong hitherto unreported cultural effects. Overall, our paper points to the importance of clearly separating the measurement and effects of gravity and culture- gravity always deters trade, but aspects of culture can encourage trade.

. The authors are grateful for the helpful comments from Janice How and

and International Merger and Acquisition Activity This study examines the role that CEO overconfidence plays in an explanation of international mergers and acquisitions during the period 2000-2006. Using a sample of CEOs of Fortune Global 500 firms over our sample period, we document a number of demographic and national patterns in the global distribution of overconfident CEOs. We find that the Hofstede measures of national culture partially explain these geographical patterns in the dispersion of overconfident CEOs. We conclude that CEO overconfidence is an international phenomenon, although it is most extensively observed in younger individuals heading firms headquartered in Christian countries that encourage individualism while deemphasizing a long-term orientation in their national cultures. We also find that overconfidence is related to a number of aspects of merger activity. CEO overconfidence helps to explain the number of offers made by a CEO, the

Certified by…………………..............................................................................................................................

We explicitly examine the role of culture in corporate takeover decisions. Prior research suggests that the risk aversion of CEOs affects their takeover decisions. In this paper, we argue that managerial risk aversion at a national level is a cultural trait and affects the net synergies. CEOs of firms located in countries with higher level of risk aversion, measured by Hofstede’s (2001) uncertainty avoidance score, show less takeover activity, engage more in diversifying takeovers and require higher premiums on takeovers. Required net synergies are higher for smaller firms, relatively larger deals, and for firms that engage in more takeover activity.

This study addresses an apparent impasse in the research on organizations ’ responses to cultural distance. We posit that cross-country differences in egalitarianism—a cultural orientation manifested in intolerance for abuses of market and political power and support for protection of less powerful actors—affect multinational firms ’ choices of destinations for foreign direct investment (FDI). Using historically motivated instrumental variables, we observe that egalitarianism distance has a negative causal impact on FDI flows. This effect is robust to a broad set of competing accounts, including the effects of other cultural dimensions, various features of the prevailing legal and regulatory regimes, other features of the institutional environment, economic development, and time-invariant unobserved characteristics of origin and host countries. We further show that egalitarianism correlates in a conceptually compatible way with an array of organizational practices pertinent to firms ’ interactions with non-financial stakeholders, such that national differences in these egalitarianism-related features may affect firms ’ international expansion decisions. Key words: foreign direct investment; neo-institutionalism; FDI; global strategy; multinational firm; culture; cultural distance; egalitarianism; regulatory arbitrage; Pollution Haven Hypothesis; entrepreneurship

in household finance?