Charles A. Dice Center Working Paper No. 2011-1
52 Pages Posted: 4 Jan 2011
Date Written: January 3, 2011
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.
Keywords: Cross-Border Acquisitions, Governance, Globalization, Bidder returns
JEL Classification: G31, G32, G34
Suggested Citation: Suggested Citation
Ellis, Jesse A. and Moeller, Sara B. and Schlingemann, Frederik P. and Stulz, René 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: https://ssrn.com/abstract=1734308 or http://dx.doi.org/10.2139/ssrn.1734308