Corporate Governance Convergence in the European M&A Market

Abstract

Cross-border acquisitions lead to significant improvements in shareholder rights and more dispersed ownership structures in a large sample of intra-European takeovers. This is evidence of corporate governance convergence toward the Anglo-Saxon system through cross-border takeovers. However, we find no support for the corporate governance motive hypothesis in cross-border acquisitions even after accounting for potential sample selectivity. Although acquirers have significantly better shareholder rights than their targets, there are no robust and significant marginal bidder wealth effects for firms that acquire either weaker or stronger governance foreign targets. Instead, bidder wealth effects in cross-border acquisitions are better explained by acculturation costs.

Keywords: Mergers and acquisitions, market for corporate control, cross-border acquisitions, corporate governance, investor protection, shareholder rights, acquirer returns, bidder wealth effects

JEL Classification: G30, G34