Abstract

http://ssrn.com/abstract=1734308
 
 

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Globalization, Governance, and the Returns to Cross-Border Acquisitions


Jesse A. Ellis


North Carolina State University

Sara B. Moeller


University of Pittsburgh - Finance Group

Frederik P. Schlingemann


University of Pittsburgh - Finance Group; Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM)

Rene M. Stulz


Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

January 3, 2011

Charles A. Dice Center Working Paper No. 2011-1
Fisher College of Business Working Paper No. 2011-03-001

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.

Number of Pages in PDF File: 52

Keywords: Cross-Border Acquisitions, Governance, Globalization, Bidder returns

JEL Classification: G31, G32, G34

working papers series


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Date posted: January 4, 2011  

Suggested Citation

Ellis, Jesse A. and Moeller, Sara B. and Schlingemann, Frederik P. and Stulz, Rene M., Globalization, Governance, and the Returns to Cross-Border Acquisitions (January 3, 2011). Charles A. Dice Center Working Paper No. 2011-1; Fisher College of Business Working Paper No. 2011-03-001. Available at SSRN: http://ssrn.com/abstract=1734308 or http://dx.doi.org/10.2139/ssrn.1734308

Contact Information

Jesse A. Ellis
North Carolina State University ( email )
Poole College of Management
Campus Box 7229
Raleigh, NC 27695
United States
919-515-9670 (Phone)
Sara B. Moeller
University of Pittsburgh - Finance Group ( email )
372 Mervis Hall
Pittsburgh, PA 15260
United States
Frederik Paul Schlingemann
University of Pittsburgh - Finance Group ( email )
372 Mervis Hall
Pittsburgh, PA 15260
United States
(412) 648 1847 (Phone)
(412) 648 1693 (Fax)
Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) ( email )
P.O. Box 1738
Room T08-21
3000 DR Rotterdam, 3000 DR
Netherlands
Rene M. Stulz (Contact Author)
Ohio State University (OSU) - Department of Finance ( email )
2100 Neil Avenue
Columbus, OH 43210-1144
United States
HOME PAGE: http://www.cob.ohio-state.edu/fin/faculty/stulz

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
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References:  49
Citations:  9

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