Do geographic distances proxy a high probability of foreign divestment? Evidence from Japanese multinational firms

We aim to provide an unambiguous explanation for the positive influence of the geographic distance between a firm's home and host country on divestment decisions of Japanese multinational firms’ outbound merger and acquisition (M&A). Our analysis of 868 acquisitions made by 496 firms in 45 countries and regions from 2005 to 2015 highlights the importance of drawing a clear distinction among various foreign divestment motives before inferring the impact of geographic distances rashly, especially whether it is failure-driven or global business strategy-driven. We further find that its impact hinges on parent firm- and deal-level attributes, that is, geographic distance is less salient for large firms, young firms, and foreign operations under a complete control mode; however, the opposite was the case for firms with a high debt burden.