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The Legal Environment and Corporate Valuation: Evidence from Cross-Border Takeovers

35 Pages Posted: 21 Jul 2001 Last revised: 31 Oct 2008

David R. Kuipers

University of Missouri at Kansas City - Department of Finance, Information Management, and Strategy

Darius P. Miller

Southern Methodist University (SMU) - Edwin L. Cox School of Business

Ajay Patel

Wake Forest University, School of Business

Date Written: September 1, 2008

Abstract

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

Kuipers, David R. and Miller, Darius P. and Patel, Ajay, The Legal Environment and Corporate Valuation: Evidence from Cross-Border Takeovers (September 1, 2008). International Review of Economics & Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=277488 or http://dx.doi.org/10.2139/ssrn.277488

David Kuipers

University of Missouri at Kansas City - Department of Finance, Information Management, and Strategy ( email )

Kansas City, MO 64110
United States

Darius Miller

Southern Methodist University (SMU) - Edwin L. Cox School of Business ( email )

P.O. Box 750333
Dallas, TX 75275-0333
United States

Ajay Patel (Contact Author)

Wake Forest University, School of Business ( email )

1834 Wake Forest Road
Building 60, Farrell Hall
Winston-Salem, NC 27106
United States
336-758-5575 (Phone)
336-758-4514 (Fax)

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