Board participation, toeholds and the cross-border effect

Mattias Hamberg, Conny Overland and Björn Lantz

International Business Review, 2013, vol. 22, issue 5, 868-882

Abstract: Research shows that the bid announcement return (BAR) of the acquiring firm is lower for cross-border than domestic acquisition announcements. The current lack of economically based explanations for this effect, labeled the cross-border effect by Moeller and Schlingemann (2005), motivates our study. We use unique hand-collected corporate governance data to study how the relationships between acquiring and target firms prior to a bid announcement affect the cross-border effect. Our tests show that non-operating associations between the acquiring and target firms, in the form of board participation and toeholds, have a positive effect on the BAR. The cross-border effect disappears when we control for board participation and toeholds. Thus, we suggest that the cross-border effect is at least partly a consequence of information asymmetries and the adverse selection problem that they generate.

Keywords: Board participation; Cross-border acquisitions; Cross-border effect; Toeholds Sweden (search for similar items in EconPapers)
JEL-codes: G34 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (1)

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DOI: 10.1016/j.ibusrev.2013.01.004

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