Corporate Governance and State Expropriation Risk

52 Pages Posted: 14 Mar 2011 Last revised: 27 Aug 2019

See all articles by Burcin Col

Burcin Col

Pace University-Lubin School of Business

Vihang R. Errunza

McGill University - Desautels Faculty of Management

Date Written: December 1, 2013

Abstract

Recent studies show that the transfer of corporate governance structure across borders has significant valuation consequences. It is equally important to consider the valuation effect of state expropriation risk as well as its interaction with quality of corporate governance. Using a sample of cross-border acquisitions during 1989-2009, we find that targets, which operate under some degree of state expropriation risk, receive a significantly lower premium. The target shareholders are not fully rewarded for the improvement in firm governance since the benefits of improvement are mitigated under predation. Our results provide evidence for twin-agency theory of Stulz (2005) through cross-border mergers.

Keywords: Cross-border mergers, state expropriation, corporate governance

JEL Classification: G15, G34, G38

Suggested Citation

Col, Burcin and Errunza, Vihang R., Corporate Governance and State Expropriation Risk (December 1, 2013). Pace University Finance Research Paper No. 2011/01, Available at SSRN: https://ssrn.com/abstract=1785125 or http://dx.doi.org/10.2139/ssrn.1785125

Burcin Col (Contact Author)

Pace University-Lubin School of Business ( email )

One Pace Plaza
New York, NY 100038
United States

Vihang R. Errunza

McGill University - Desautels Faculty of Management ( email )

1001 Sherbrooke St. West
Montreal, Quebec H3A1G5 H3A 2M1
Canada
514-398-4056 (Phone)
514-398-3876 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
122
Abstract Views
4,697
rank
278,222
PlumX Metrics