Corporate Governance Transfer and Synergistic Gains from Mergers and Acquisitions
The Chinese University of Hong Kong (CUHK) - Department of Finance
Review of Financial Studies, Forthcoming
We present evidence on the benefits of changes in control from mergers and acquisitions. We find that the stronger the acquirer's shareholder rights relative to the target's, the higher the synergy created by an acquisition. This result supports the hypothesis that acquisitions of firms with poor corporate governance by firms with good corporate governance generate higher total gains. We also find that the synergy effect of corporate governance is shared by target shareholders and acquiring shareholders, in that both target returns and acquirer returns increase with the shareholder-rights difference between the acquirer and the target.
Number of Pages in PDF File: 49
Keywords: Corporate Governance, Mergers and Acquisitions, Synergy, Efficiency Gains
JEL Classification: G34, G14Accepted Paper Series
Date posted: May 18, 2007 ; Last revised: October 29, 2007
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