This study examines the effect of religion on cross-border mergers and acquisitions (M&As). We measure the religious distance between countries and find that cross-border M&A activity is lower for country pairs with greater religious distance. This finding remains intact after a host of variables affecting M&A activity are controlled for and when instrumental variables are used for religious distance. Moreover, the negative effect of religious distance on cross-border M&A activity is more pronounced if the people living in either the acquirer or target country are more religious. Overall, our results suggest that differences in religious beliefs impose an additional coordination cost on merging firms and thereby inhibit cross-border M&A activity. (JEL G34, Z12) 

Keywords: Cross-Border Mergers and Acquisitions; Religion; Religiosity.​