Spillover of Corporate Governance Standards in Cross-Border Mergers and AcquisitionsDr. Marina Martynova () and
L.D.R. Renneboog
No 2008-18, Discussion Paper from Tilburg University, Center for Economic Research Abstract: In cross-border acquisitions, the differences between the bidder and target corporate governance have an important impact on the takeover returns. Our country-level corporate governance indices capture the changes in the quality of the national corporate governance regulations over the past 15 years. When the bidder is from a country with a strong shareholder orientation (relative to the target), part of the total synergy value of the takeover may result from the improvement in the governance of the target assets. In full takeovers, the corporate governance regulation of the bidder is imposed on the target (the positive spillover by law hypothesis). In partial takeovers, the improvement in the target corporate governance may occur on voluntary basis (the spillover by control hypothesis). Our empirical analysis corroborates both spillover effects. In contrast, when the bidder is from a country with poorer shareholder protection, the negative spillover by law hypothesis states that the anticipated takeover gains will be lower as the poorer corporate governance regime of the bidder will be imposed on the target. The alternative bootstrapping hypothesis argues that poor-governance bidders voluntarily bootstrap to the better-governance regime of the target. We do find support for this bootstrapping effect. JEL-codes: G30 G34 G38 G18 G14 G15 (search for similar items in EconPapers) Downloads: (external link) Related works: Access Statistics for this paper More papers in Discussion Paper from Tilburg University, Center for Economic Research |
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