International Corporate Governance Spillovers: Evidence from Cross-Border Mergers and Acquisitions
66 Pages Posted: 13 Aug 2013 Last revised: 7 Mar 2018
Date Written: March 1, 2018
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