63 Pages Posted: 13 Aug 2013 Last revised: 12 Sep 2017
Date Written: August 26, 2017
We test the hypothesis that foreign direct investment promotes corporate governance spillovers in the host country. Using firm-level data from 64 countries during the period 2005-2014, we find that cross-border M&A activity is associated with subsequent improvements in the governance of non-target firms when the acquirer’s country has stronger investor protection than the target’s country. The effect is more pronounced when the target’s industry is more competitive. Cross-border M&As are also associated with increases in investment and valuation of non-target firms. Alternative explanations such as access to global financial markets and cultural similarities do not appear to explain our findings.
Keywords: Foreign direct investment, Corporate governance, Cross-border mergers and acquisitions, Spillovers
JEL Classification: G32, G34, G38
Suggested Citation: 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 (August 26, 2017). 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
By Alex Edmans