Corporate Governance Transfer and Synergistic Gains from Mergers and Acquisitions

Cong Wang; Fei Xie

doi:10.1093/rfs/hhn018

Corporate Governance Transfer and Synergistic Gains from Mergers and Acquisitions

¹ Chinese University of Hong Kong, Shenzhen · ² Chinese University of Hong Kong · ³ University of Delaware · ⁴ George Mason University

Review of Financial Studies 2009 open access

We present evidence on the benefits of changes in control from mergers and acquisitions. We find that the stronger the acquirer's shareholder rights relative to the target's, the higher the synergy created by an acquisition. This result supports the hypothesis that acquisitions of firms with poor corporate governance by firms with good corporate governance generate higher total gains. We also find that the synergy effect of corporate governance is shared by target shareholders and acquiring shareholders, in that both target returns and acquirer returns increase with the shareholder-rights difference between the acquirer and the target.

DOI: 10.1093/rfs/hhn018
Volume: 22 (2)
Pages: 829-858
Language: en
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