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Why Are U.S. Stocks More Volatile?

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  • SÖHNKE M. BARTRAM
  • GREGORY BROWN
  • RENÉ M. STULZ

Abstract

Using a sample of control cross-border acquisitions from 61 countries from 1990 to 2007, we find that acquirers from countries with better governance gain more from such acquisitions and their gains are higher when targets are from countries with worse governance. Other acquirer country characteristics are not consistently related to acquisition gains. For instance, the anti-self-dealing index of the acquirer has opposite associations with acquirer returns depending on whether the acquisition of a public firm is paid for with cash or equity. Strikingly, global effects in acquisition returns are at least as important as acquirer country effects. First, the acquirer's industry and the year of the acquisition explain more of the stock-price reaction than the country of the acquirer. Second, for acquisitions of private firms or subsidiaries, acquirers gain more when acquisition returns are high for acquirers from other countries. We find strong evidence that better alignment of interests between insiders and minority shareholders is associated with greater acquirer returns and weaker evidence that this effect mitigates the adverse impact of poor country governance.

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Bibliographic Info

Article provided by American Finance Association in its journal Journal of Finance.

Volume (Year): 67 (2012)
Issue (Month): 4 (08)
Pages: 1329-1370

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Handle: RePEc:bla:jfinan:v:67:y:2012:i:4:p:1329-1370

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Cited by:
  1. Datta, Sudip & Iskandar-Datta, Mai & Singh, Vivek, 2014. "Opaque financial reports and R2: Revisited," Review of Financial Economics, Elsevier, vol. 23(1), pages 10-17.
  2. Lau, Chi Keung Marco & Demir, Ender & Bilgin, Mehmet Huseyin, 2013. "Experience-based corporate corruption and stock market volatility: Evidence from emerging markets," Emerging Markets Review, Elsevier, vol. 17(C), pages 1-13.
  3. Mohamed Mnasri & Georges Dionne & Jean-Pierre Gueyie, 2013. "The Maturity Structure of Corporate Hedging: the Case of the U.S. Oil and Gas Industry," Cahiers de recherche 1337, CIRPEE.
  4. Weiß, Gregor N.F. & Neumann, Sascha & Bostandzic, Denefa, 2014. "Systemic risk and bank consolidation: International evidence," Journal of Banking & Finance, Elsevier, vol. 40(C), pages 165-181.

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