 Cross-Border Takeovers, Corruption, and Related Aspects of GovernanceUtz Weitzel and S. Berns No 06-03, Working Papers from Utrecht School of Economics Abstract: We use a panel of 4979 cross-border and domestic takeovers to test the relation between host country corruption and premiums paid for local targets. Host country corruption is negatively associated with target premiums, after correcting for other governance related factors such as political stability, legal systems, and financial disclosure standards. We estimate that deterioration in the corruption index by one point (on a ten point scale) is, on average, associated with a reduction of 21% of local targets’ premiums. Our results do not support the notion that local corruption constitutes a significant market barrier to foreign investors. It rather represents a discount on local takeover synergies, which affects foreign and domestic acquirers alike. However, we find that the major effects of corruption can alternatively be explained by government effectiveness, pointing towards an endogenous relationship between bribery and bureaucracy. Keywords: corruption; mergers and acquisitions; multinational enterprise; governance; foreign direct investment; institutions (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:use:tkiwps:0603 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in Working Papers from Utrecht School of Economics Contact information at EDIRC. |
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