The Value of Investor Protection: Firm Evidence from Cross-Border Mergers |
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Authors: | Bris Arturo; Cabolis Christos |
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Institution: | IMD, ECGI, and Yale International Center for Finance |
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Abstract: | International law prescribes that in a cross-border acquisitionof 100% of the target shares, the target firm becomes a nationalof the country of the acquiror, and consequently subject toits corporate governance system. Therefore, cross-border mergersprovide a natural experiment to analyze the effects of changesin corporate governance on firm value. We construct measuresof the change in investor protection in a sample of 506 acquisitionsfrom 39 countries. We find that the better the shareholder protectionand accounting standards in the acquiror's country, the higherthe merger premium in cross-border mergers relative to matchingdomestic acquisitions. |
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