Merger Laws, Globalization, and Corporate Value

43 Pages Posted: 15 Mar 2002

See all articles by Arturo Bris

Arturo Bris

IMD International; European Corporate Governance Institute (ECGI); Yale University - International Center for Finance

Christos Cabolis

IMD; Yale SOM International Center for Finance

Date Written: March 2002

Abstract

This paper is the first attempt to isolate the direct effect of competition laws on a country's merger activity and indirectly on corporate value. We find that, although the direct relationship between merger laws and Tobin's Q is positive and significant, once we control for the net cross-border merger flows in a country, the relationship vanishes. We conclude that the positive effect of merger laws on corporate value is driven by their deterring effect on horizontal, cross-border, anti-competitive mergers. To the extent that the trend towards globalization in the world has dramatically increased merger flows from some countries to others, we argue that there is a need for competition laws that make up for the pervasive effects of the global market on some countries. We also show that the European Merger Directive has had a negative impact on corporations value.

Keywords: mergers, market regulation, cross-border acquisitions

JEL Classification: G38, G34, G15

Suggested Citation

Bris, Arturo and Cabolis, Christos, Merger Laws, Globalization, and Corporate Value (March 2002). Available at SSRN: https://ssrn.com/abstract=302912 or http://dx.doi.org/10.2139/ssrn.302912

Arturo Bris (Contact Author)

IMD International ( email )

Ch. de Bellerive 23
P.O. Box 915
CH-1001 Lausanne
Switzerland

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Yale University - International Center for Finance ( email )

Box 208200
New Haven, CT 06520
United States

Christos Cabolis

IMD ( email )

Ch. de Bellerive 23
P.O. Box 915
CH-1001 Lausanne
Switzerland
+41 21 618 0742 (Phone)
+41 21 618 0707 (Fax)

Yale SOM International Center for Finance ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-7108 (Phone)
203-432-8931 (Fax)

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