Abstract

http://ssrn.com/abstract=1987104
 


 



Globalization, Country Governance, and Corporate Investment Decisions: An Analysis of 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 17, 2012

Fisher College of Business Working Paper No. 2012-3
Charles A. Dice Center Working Paper No. 2012-03-003

Abstract:     
Using a sample of control cross-border acquisitions from 56 countries from 1990 to 2007, we find that acquirers from better governed countries gain more from such acquisitions and their gains are higher when targets are from worse governed countries. Other acquirer country characteristics, including the indices for laws protecting investors the earlier literature focuses on, are not consistently related to acquisition gains. However, globalization leaves a strong mark on acquisition returns. Acquisition returns are affected by global factors at least as much as they are by acquirer country factors. First, across all acquisitions, 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. A country’s governance and global mergers and acquisitions activity are important predictors of mergers and acquisitions activity in that country. Finally, we find strong evidence that at the firm-level 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 for the bidder.

Number of Pages in PDF File: 62

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Date posted: January 18, 2012  

Suggested Citation

Ellis, Jesse A. and Moeller, Sara B. and Schlingemann, Frederik P. and Stulz, Rene M., Globalization, Country Governance, and Corporate Investment Decisions: An Analysis of Cross-Border Acquisitions (January 17, 2012). Fisher College of Business Working Paper No. 2012-3. Available at SSRN: http://ssrn.com/abstract=1987104 or http://dx.doi.org/10.2139/ssrn.1987104

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
Feedback to SSRN


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