International Corporate Governance Spillovers: Evidence from Cross-Border Mergers and Acquisitions

61 Pages Posted: 13 Aug 2013 Last revised: 17 Dec 2015

Rui A. Albuquerque

Boston College, Carroll School of Management; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Luis Brandao Marques

International Monetary Fund - Monetary and Capital Markets Department

Miguel A. Ferreira

Nova School of Business and Economics; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Pedro P. Matos

University of Virginia - Darden School of Business; European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: October 18, 2015

Abstract

We test the hypothesis that foreign direct investment promotes corporate governance spillovers in the host country non-target firms. Using firm-level data from 22 countries, we find that cross-border M&A activity is associated with subsequent improvements in the governance of target firms’ rivals. The spillover is more pronounced when the acquirer’s country has stronger investor protection than the target’s country, and when the target operates in a competitive industry. Cross-border M&As also lead to increases in valuation and reductions in overinvestment of non-target firms. Our results suggest that the international market for corporate control promotes functional convergence in corporate governance.

Keywords: Foreign direct investment, Corporate governance, Cross border mergers and acquisitions, Spillovers

JEL Classification: G32, G34, G38

Suggested Citation

Albuquerque, Rui A. and Brandao Marques, Luis and Ferreira, Miguel A. and Matos, Pedro P., International Corporate Governance Spillovers: Evidence from Cross-Border Mergers and Acquisitions (October 18, 2015). European Corporate Governance Institute (ECGI) - Finance Working Paper No. 390/2014; Darden Business School Working Paper No. 2309117. Available at SSRN: https://ssrn.com/abstract=2309117 or http://dx.doi.org/10.2139/ssrn.2309117

Rui A. Albuquerque

Boston College, Carroll School of Management ( email )

140 Commonwealth Avenue
Chustnut Hill, MA 02467-3808
United States

HOME PAGE: http://ruialbuquerque.webs.com

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Luis Brandao Marques

International Monetary Fund - Monetary and Capital Markets Department ( email )

700 19th Street, N.W.
Washington, DC 20431
United States
2026238308 (Phone)
2025898308 (Fax)

Miguel Almeida Ferreira (Contact Author)

Nova School of Business and Economics ( email )

Campus de Campolide
Lisbon, 1099-032
Portugal

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Pedro P. Matos

University of Virginia - Darden School of Business ( email )

University of Virginia
P.O. Box 6550
Charlottesville, VA 22906-6550
United States

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

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