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

Albuquerque, Rui A.; Brandao-Marques, Luis; Ferreira, Miguel A.; Matos, Pedro

doi:10.2139/ssrn.2309117

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

European Corporate Governance Institute (ECGI) - Finance Working Paper No. 390/2014

Darden Business School Working Paper No. 2309117

66 Pages Posted: 13 Aug 2013 Last revised: 7 Mar 2018

See all articles by Rui A. Albuquerque

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 Matos

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

There are 3 versions of this paper

Date Written: March 1, 2018

Abstract

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 country has stronger investor protection than the target country. The effect is more pronounced when the target 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 Almeida and Matos, Pedro, International Corporate Governance Spillovers: Evidence from Cross-Border Mergers and Acquisitions (March 1, 2018). 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