Corporate Governance Transfer and Synergistic Gains from Mergers and Acquisitions

49 Pages Posted: 18 May 2007 Last revised: 29 Oct 2007

Cong Wang

China Europe International Business School (CEIBS)

Fei Xie

University of Delaware

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Abstract

We present evidence on the benefits of changes in control from mergers and acquisitions. We find that the stronger the acquirer's shareholder rights relative to the target's, the higher the synergy created by an acquisition. This result supports the hypothesis that acquisitions of firms with poor corporate governance by firms with good corporate governance generate higher total gains. We also find that the synergy effect of corporate governance is shared by target shareholders and acquiring shareholders, in that both target returns and acquirer returns increase with the shareholder-rights difference between the acquirer and the target.

Keywords: Corporate Governance, Mergers and Acquisitions, Synergy, Efficiency Gains

JEL Classification: G34, G14

Suggested Citation

Wang, Cong and Xie, Fei, Corporate Governance Transfer and Synergistic Gains from Mergers and Acquisitions. Review of Financial Studies, Forthcoming. Available at SSRN: https://ssrn.com/abstract=987113

Cong Wang (Contact Author)

China Europe International Business School (CEIBS) ( email )

Shanghai-Hongfeng Road
Shanghai 201206
Shanghai 201206
China

Fei Xie

University of Delaware ( email )

Newark, DE 19711
United States

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