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

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

Rui Albuquerque, Miguel Ferreira, Luis Brandão-Marques, Pedro Matos

Series number :

Serial Number: 
390/2014

Date posted :

January 01 2014

Last revised :

March 12 2018
SSRN Share

Keywords

  • foreign direct investment • 
  • Corporate governance • 
  • Cross border mergers and acquisitions • 
  • Spillovers

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 non-target 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 non-target firms. Alternative explanations such as access to global financial markets and cultural similarities do not appear to explain our findings.

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Authors

Real name: 
Luis Brandão-Marques
Professor
Real name: 
Pedro Matos
Research Member
Darden School of Business, University of Virginia