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Investor protection and cross-border acquisitions of private and public targets

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  • John, Kose
  • Freund, Steven
  • Nguyen, Duong
  • Vasudevan, Gopala K.

Abstract

We examine the announcement-period acquirer returns and target values for a large sample of cross-border acquisitions by U.S. firms, differentiating between private and public targets and paying particular attention to the legal protection of minority shareholders in the target country. For high-protection target countries, acquirer announcement-period returns are significantly negative for public targets and significantly positive for private targets. For low-protection target countries, the acquirer returns are significantly positive for public targets and insignificantly different from zero for private targets. For public targets, acquirer returns are decreasing and target-firm values and acquisition premia are increasing with the level of investor protection. For private targets, investor protection does not affect acquirer returns or target-firm values. We find that bidder returns decrease with the level of creditor protection in the target country and increase with the quality of accounting standards. Our results also show that in low- protection countries, firm-level corporate governance mechanisms, such as higher insider ownership, may substitute for the lower level of investor protection.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Corporate Finance.

Volume (Year): 16 (2010)
Issue (Month): 3 (June)
Pages: 259-275

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Handle: RePEc:eee:corfin:v:16:y:2010:i:3:p:259-275

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Web page: http://www.elsevier.com/locate/jcorpfin

Related research

Keywords: Corporate governance Cross-border acquisitions Private-target takeovers Shareholder protection;

References

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Citations

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Cited by:
  1. Elena Skouratova & John Wald, 2013. "How crosslisting affects merger and acquisition activity," Review of Quantitative Finance and Accounting, Springer, vol. 40(2), pages 319-339, February.
  2. Kose John & Ravi S. Mateti & Zhaoyun Shangguan & Gopala Vasudevan, 2013. "Does overvaluation of bidder stock drive acquisitions? The case of public and private targets," International Journal of Banking, Accounting and Finance, Inderscience Enterprises Ltd, vol. 5(1/2), pages 188-204.
  3. Madura, Jeff & Susnjara, Jurica, 2013. "The appeal of private targets in international acquisitions," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 24(C), pages 198-222.

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