We examine a firm's motivation to engage in cross-border mergers and acquisitions (CBMAs) and the source of value gains in such transactions. We find that the difference in industry growth opportunities between the target and acquirer countries (Relative industry growth (RIG)) is a key drivin factor for CBMAs and the high RIG is associated with greater CBMA announcement returns. Moreover, merged firms in high RIG CBMAs experiece better operating performance, invest more, and engage in fewer divestitures post-CBMA. A zero-cost portfolio buying acquirers in CBMAs with high RIG and selling those in CBMAs with low RIG generates positive excess returns. 

Keywords: Cross-border mergers and acquisitions, Relative industry growth, Synergy, Valuation effect, Long-term post-M&A performance