Abstract

http://ssrn.com/abstract=2124713
 
 

References (58)



 


 



Cherry Picking in Cross-Border Acquisitions


E. Han Kim


University of Michigan, Stephen M. Ross School of Business

Yao Lu


Tsinghua University - School of Economics & Management

August 5, 2012


Abstract:     
This paper attempts to explain the tendency of foreign acquirers to choose better performing firms in emerging markets, which limits underperforming firms’ access to foreign capital. Using a simple law and finance model, we offer an explanation based on emerging countries’ weaker investor protection (IP) compared to acquirers’ home countries, predicting a positive relation between the gap in the strength of IP (between acquiring and target countries) and the intensity to cherry pick. To test this prediction, we identify among our sample countries 20 economies that enacted major corporate governance reforms (CGRs). These CGRs change the gap in IP between an acquirer and a target country in a staggered fashion, enabling us to estimate differences-in-differences. Estimation results reveal that cherry picking moderates after a target country undertakes a CGR, which narrows the IP gap. Conversely, cherry picking intensifies after an acquirer’s home country enacts a CGR, which enlarges the IP gap. These results imply emerging economies must strengthen investor protection if they want to increase underperforming firms’ access to foreign capital.

Number of Pages in PDF File: 45

Keywords: Investor Protection, Corporate Governance Reforms, Target Selection, Private Benefits of Control, Control Premiums

JEL Classification: F21, G34, K22

working papers series





Download This Paper

Date posted: August 6, 2012  

Suggested Citation

Kim, E. Han and Lu, Yao, Cherry Picking in Cross-Border Acquisitions (August 5, 2012). Available at SSRN: http://ssrn.com/abstract=2124713 or http://dx.doi.org/10.2139/ssrn.2124713

Contact Information

E. Han Kim (Contact Author)
University of Michigan, Stephen M. Ross School of Business ( email )
701 Tappan Street
Ann Arbor, MI MI 48109
United States
734-764-2282 (Phone)
734-763-3117 (Fax)
Yao Lu
Tsinghua University - School of Economics & Management ( email )
Beijing, 100084
China
Feedback to SSRN


Paper statistics
Abstract Views: 594
Downloads: 96
Download Rank: 164,179
References:  58

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo7 in 0.344 seconds