Foreign Bribery and Takeovers: International Evidence

Abstract

Bribery is a key consideration in cross-border takeovers. Using exogenous implementations of anti-bribery laws cross 41 countries, I find that criminalizing acquirers for foreign bribery reduces aggregate cross-border M&A activities by approximately 30%, acquirers’ gains by over half, and bid premium by 10%. These effects are stronger for public transactions and for targets located in countries (industries) with a higher level of corruption. Taken together, the findings support the efficient side-payment model, which predicts a positive relation between bribery and cross-border transaction value.

Keywords: Cross-border mergers and acquisitions (M&A), Corruption, Anti-bribery legislation, Deal synergy

JEL Classification: G34, G38, K22