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Corporate Governance and the Returns to Acquiring Firms' Shareholders: An International Comparison

Managerial and Decision Economics, Forthcoming

39 Pages Posted: 4 Dec 2006  

Dennis C. Mueller

University of Vienna - Center for Business Studies - Department of Economics

B. Burcin Yurtoglu

WHU - Otto Beisheim School of Management

Abstract

We examine the effects of mergers on the returns to acquiring companies' shareholders for a large sample of companies from both Anglo-Saxon and non-Anglo-Saxon countries over the 1980s and 1990s. With the important exception of Japan, we find similar patterns of returns across both types of countries. For a sample of 9,733 acquiring companies the mean percentage gain over a short window of 21 days is 0.6 percent. This picture changes dramatically as the market has more time to evaluate the mergers and/or the acquiring firms. After three years, acquirers' shareholders in the United States and continental Europe lost on average 19 percent of their market value compared to a portfolio of non-merging firms in their size deciles and their two-digit industry, in Canada, Australia and New Zealand roughly 16 percent, and in the four Scandinavian countries almost 15 percent. Further analysis indicates that some mergers are consistent with the hypothesis that mergers generate synergies, but that a majority of mergers in Continental Europe are explained by the managerial discretion and/or hubris hypothesis. Our findings also suggest that that corporate governance institutions in the United States and the other Anglo-Saxon countries lead to better investment performance than in continental Europe, when one confines one's attention to mergers.

Keywords: Corporate Governance, Mergers, Acquisitions, Determinants of Mergers, Effects of Mergers, International Comparison

JEL Classification: G34, L21

Suggested Citation

Mueller, Dennis C. and Yurtoglu, B. Burcin, Corporate Governance and the Returns to Acquiring Firms' Shareholders: An International Comparison. Managerial and Decision Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=948924

Dennis C. Mueller

University of Vienna - Center for Business Studies - Department of Economics ( email )

BWZ - BrĂ¼nner Str.
A-1010 Vienna
Austria
+43 1 4277 37484 (Phone)
+43 1 4277 37498 (Fax)

HOME PAGE: http://mailbox.univie.ac.at/~muelled2/

B. Burcin Yurtoglu (Contact Author)

WHU - Otto Beisheim School of Management ( email )

Chair of Corporate Finance
Burgplatz 2
Vallendar, 56179
Germany
+49 261 6509-721 (Phone)
+49 261 6509-729 (Fax)

HOME PAGE: http://www.whu.edu/forschung/fakultaet/finance-group/corporate-finance/

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