The Value of Investor Protection: Firm Evidence from Cross-Border Mergers

Arturo Bris and Christos Cabolis

The Review of Financial Studies, 2008, vol. 21, issue 2, 605-648

Abstract: International law prescribes that in a cross-border acquisition of 100% of the target shares, the target firm becomes a national of the country of the acquiror, and consequently subject to its corporate governance system. Therefore, cross-border mergers provide a natural experiment to analyze the effects of changes in corporate governance on firm value. We construct measures of the change in investor protection in a sample of 506 acquisitions from 39 countries. We find that the better the shareholder protection and accounting standards in the acquiror's country, the higher the merger premium in cross-border mergers relative to matching domestic acquisitions. 2008 London Mathematical Society, Oxford University Press.

Date: 2008
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