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

63 Pages Posted: 13 Aug 2013 Last revised: 12 Sep 2017

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: August 26, 2017

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’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

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

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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