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The Value of Investor Protection: Firm Evidence from Cross-Border Mergers

Arturo Bris
IMD International; European Corporate Governance Institute (ECGI); Yale University - International Center for Finance

Christos Cabolis
ALBA Graduate Business School; Yale SOM International Center for Finance

Review of Financial Studies, Vol. 21, Issue 2, pp. 605-648, 2008

Abstract:
International law prescribes that in a cross-border acquisition of 100% of the target shares, the target firm becomes a national of the country of the acquiror, and consequently subject to its corporate governance system. Therefore, cross-border mergers provide a natural experiment to analyze the effects of changes in corporate governance on firm value. We construct measures of the change in investor protection in a sample of 506 acquisitions from 39 countries. We find that the better the shareholder protection and accounting standards in the acquiror's country, the higher the merger premium in cross-border mergers relative to matching domestic acquisitions.

Keywords: F3, F4, G3

Accepted Paper Series

Date posted: June 26, 2008 ; Last revised: September 26, 2009

Suggested Citation

Bris, Arturo and Cabolis, Christos, The Value of Investor Protection: Firm Evidence from Cross-Border Mergers (April 2008). Review of Financial Studies, Vol. 21, Issue 2, pp. 605-648, 2008. Available at SSRN: http://ssrn.com/abstract=1151600 or doi:hhm089

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Contact Information

Arturo Bris (Contact Author) IMD International ( email ) Ch. de Bellerive 23 P.O. Box 915 CH-1001 Lausanne Switzerland
European Corporate Governance Institute (ECGI) c/o ECARES ULB CP 114 B-1050 Brussels Belgium HOME PAGE: http://www.ecgi.org
Yale University - International Center for Finance ( email ) Box 208200 New Haven, CT 06520 United States
Christos Cabolis ALBA Graduate Business School ( email ) Athinas Ave. & 2A Areos Str. Vouliagmeni 166 71, Athens Greece +30 210 896 4531 (Phone) +30 210 896 4737 (Fax)
Yale SOM International Center for Finance ( email ) 135 Prospect Street P.O. Box 208200 New Haven, CT 06520-8200 United States 203-432-7108 (Phone) 203-432-8931 (Fax)