The Legal Environment and Corporate Valuation: Evidence from Cross-Border Takeovers
35 Pages Posted: 21 Jul 2001 Last revised: 31 Oct 2008
Date Written: September 1, 2008
We examine the cumulative abnormal returns to U.S. targets, their foreign acquirers, and the target-acquirer portfolio in 181 successful cross-border tender offers during the period 1982-1991. We find that the incentive mechanisms created by the degree of shareholder-creditor rights protection and legal enforcement in the acquiring firm country can explain the observed variation in target, acquirer, and portfolio returns. We also find that foreign acquirers overpay for Delaware-incorporated targets. Our results are strengthened after controlling for deal-related effects addressed in the domestic mergers and cross-border investments literature.
Keywords: corporate governance, regulation, international asset pricing, tender offers, state of incorporation
JEL Classification: F23, G34, G38
Suggested Citation: Suggested Citation