Globalization, Governance, and the Returns to Cross-Border Acquisitions
Charles A. Dice Center Working Paper No. 2011-1
52 Pages Posted: 4 Jan 2011
There are 2 versions of this paper
Globalization, Governance, and the Returns to Cross-Border Acquisitions
Globalization, Governance, and the Returns to Cross-Border Acquisitions
Date Written: January 3, 2011
Abstract
Using a sample of control cross-border acquisitions from 61 countries from 1990 to 2007, we find that acquirers from countries with better governance gain more from such acquisitions and their gains are higher when targets are from countries with worse governance. Other acquirer country characteristics are not consistently related to acquisition gains. For instance, the anti-self-dealing index of the acquirer has opposite associations with acquirer returns depending on whether the acquisition of a public firm is paid for with cash or equity. Strikingly, global effects in acquisition returns are at least as important as acquirer country effects. First, the acquirer’s industry and the year of the acquisition explain more of the stock-price reaction than the country of the acquirer. Second, for acquisitions of private firms or subsidiaries, acquirers gain more when acquisition returns are high for acquirers from other countries. We find strong evidence that better alignment of interests between insiders and minority shareholders is associated with greater acquirer returns and weaker evidence that this effect mitigates the adverse impact of poor country governance.
Keywords: Cross-Border Acquisitions, Governance, Globalization, Bidder returns
JEL Classification: G31, G32, G34
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
The Value of Investor Protection: Firm Evidence from Cross-Border Mergers
By Arturo Bris and Christos Cabolis
-
Does Governance Travel around the World? Evidence from Institutional Investors
By Reena Aggarwal, Isil Erel, ...
-
Does Governance Travel Around the World? Evidence from Institutional Investors
By Reena Aggarwal, Isil Erel, ...
-
Multinationals as Arbitrageurs: The Effect of Stock Market Valuations on Foreign Direct Investment
By Malcolm P. Baker, C. Fritz Foley, ...
-
Shareholders at the Gate? Institutional Investors and Cross-Border Mergers and Acquisitions
By Massimo Massa, Miguel A. Ferreira, ...
-
Shareholders at the Gate? Institutional Investors and Cross-Border Mergers and Acquisitions
By Miguel A. Ferreira, Massimo Massa, ...
-
Multinationals as Arbitrageurs: The Effect of Valuations on Foreign Direct Investment
By Malcolm P. Baker, C. Fritz Foley, ...
-
Determinants of Cross-Border Mergers and Acquisitions
By Isil Erel, Rose C. Liao, ...
-
World Markets for Mergers and Acquisitions
By Isil Erel, Rose C. Liao, ...
-
Adopting Better Corporate Governance: Evidence from Cross-Border Mergers
By Arturo Bris, Neil Brisley, ...