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Review of Financial Studies Vol. 32 No. 2 2019

International Corporate Governance Spillovers: Evidence from Cross-Border Mergers and Acquisitions

Rui Albuquerque1; Luis Brandão-Marques2; Miguel A. Ferreira3; Pedro Matos4

1 Carroll School of Management, Boston College, CEPR, and ECGI · 2 International Monetary Fund · 3 Nova School of Business and Economics, CEPR, and ECGI · 4 Darden School of Business, University of Virginia and ECGI

open access

Abstract

We test the hypothesis that foreign direct investment promotes corporate governance spillovers in the host country. Using firm-level data from 64 countries during the period 2005–2014, we find that cross-border M&A activity is associated with subsequent improvements in the governance of nontarget firms when the acquirer country has stronger investor protection than the target country. The effect is more pronounced when the target industry is more competitive. Cross-border M&As are also associated with increases in investment and valuation of nontarget firms. Alternative explanations, such as access to global financial markets and cultural similarities, do not appear to explain our findings. Received October 27, 2015; editorial decision March 25, 2018 by Editor Andrew Karolyi.

DOI
10.1093/rfs/hhy053
Volume
32
Issue
2
Pages
738-770
Language
en
Sources
crossref openalex bibtex:phds-export.bib

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