This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Corporate governance and the returns to acquiring firms' shareholders: an international comparison

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Dennis C. Mueller (University of Vienna, Vienna, Austria)
B. Burcin Yurtoglu (University of Vienna, Vienna, Austria)

Additional information is available for the following registered author(s):

Abstract

We examine the effects of mergers on the returns to acquiring companies' shareholders for a large sample of companies from both Anglo-Saxon and non-Anglo-Saxon countries over the 1980s and 1990s. With the important exception of Japan, we find similar patterns of returns across both types of countries. For a sample of 9733 acquiring companies the mean percentage gain over a short window of 21 days is 0.6%. This picture changes dramatically as the market has more time to evaluate the mergers and|or the acquiring firms. After three years, acquirers' shareholders in the United States and continental Europe lost on average 19% of their market value compared to a portfolio of non-merging firms in their size deciles and their two-digit industry, in Canada, Australia and New Zealand roughly 16%, and in the four Scandinavian countries almost 15%. Further analysis indicates that some mergers are consistent with the hypothesis that mergers generate synergies, but that a majority of mergers in Continental Europe are explained by the managerial discretion and|or hubris hypothesis. Our findings also suggest that corporate governance institutions in the United States and the other Anglo-Saxon countries lead to better investment performance than in continental Europe, when one confines one's attention to mergers. Copyright © 2007 John Wiley & Sons, Ltd.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://hdl.handle.net/10.1002/mde.1365
File Format: text/html
File Function: Link to full text; subscription required
Download Restriction: no

Publisher Info
Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

Volume (Year): 28 (2007)
Issue (Month): 8 ()
Pages: 879-896
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:wly:mgtdec:v:28:y:2007:i:8:p:879-896

Contact details of provider:
Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

For technical questions regarding this item, or to correct its listing, contact: (Christopher F. Baum).

Related research
Keywords:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Gugler, Klaus & Mueller, Dennis C & Yurtoglu, B Burcin, 2004. "Corporate Governance and the Returns on Investment," Journal of Law & Economics, University of Chicago Press, vol. 47(2), pages 589-633, October.
  2. Jensen, Michael C. & Ruback, Richard S., 1983. "The market for corporate control : The scientific evidence," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 5-50, April. [Downloadable!] (restricted)
  3. Gregor Andrade & Mark Mitchell & Erik Stafford, 2001. "New Evidence and Perspectives on Mergers," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 103-120, Spring. [Downloadable!] (restricted)
  4. Roll, Richard, 1986. "The Hubris Hypothesis of Corporate Takeovers," Journal of Business, University of Chicago Press, vol. 59(2), pages 197-216, April. [Downloadable!] (restricted)
  5. Bradley, Michael & Desai, Anand & Kim, E. Han, 1988. "Synergistic gains from corporate acquisitions and their division between the stockholders of target and acquiring firms," Journal of Financial Economics, Elsevier, vol. 21(1), pages 3-40, May. [Downloadable!] (restricted)
  6. Klaus Gugler & Dennis C. Mueller & B. Burçin Yurtoglu, 2006. "The Determinants of Merger Waves," CIG Working Papers SP II 2006-01, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG). [Downloadable!]
    Other versions:
  7. Campa, José Manuel & Hernando, Ignacio, 2004. "Shareholder Value Creation in European M&As," CEPR Discussion Papers 4400, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  8. Becher, David A., 2000. "The valuation effects of bank mergers," Journal of Corporate Finance, Elsevier, vol. 6(2), pages 189-214, July. [Downloadable!] (restricted)
  9. Mandelker, Gershon, 1974. "Risk and return: The case of merging firms," Journal of Financial Economics, Elsevier, vol. 1(4), pages 303-335, December. [Downloadable!] (restricted)
  10. Smith, Richard L & Kim, Joo-Hyun, 1994. "The Combined Effects of Free Cash Flow and Financial Slack on Bidder and Target Stock Returns," Journal of Business, University of Chicago Press, vol. 67(2), pages 281-310, April. [Downloadable!] (restricted)
  11. Sara B. Moeller & Frederik P. Schlingemann & René M. Stulz, 2005. "Wealth Destruction on a Massive Scale? A Study of Acquiring-Firm Returns in the Recent Merger Wave," Journal of Finance, American Finance Association, vol. 60(2), pages 757-782, 04. [Downloadable!] (restricted)
    Other versions:
  12. Houston, Joel F. & Ryngaert, Michael D., 1994. "The overall gains from large bank mergers," Journal of Banking & Finance, Elsevier, vol. 18(6), pages 1155-1176, December. [Downloadable!] (restricted)
  13. Klaus Gugler & Dennis C. Mueller & B. Burcin Yurtoglu, 2003. "The Impact of Corporate Governance on Investment Returns in Developed and Developing Countries," Economic Journal, Royal Economic Society, vol. 113(491), pages F511-F539, November. [Downloadable!] (restricted)
  14. Goergen, Marc & Renneboog, Luc, 2003. "Shareholder Wealth Effects of European Domestic and Cross-Border Takeover Bids," EIFC - Technology and Finance Working Papers 20, United Nations University, Institute for New Technologies. [Downloadable!]
    Other versions:
  15. Ming Dong & David Hirshleifer & Scott Richardson & Siew Hong Teoh, 2006. "Does Investor Misvaluation Drive the Takeover Market?," Journal of Finance, American Finance Association, vol. 61(2), pages 725-762, 04. [Downloadable!] (restricted)
    Other versions:
  16. Malatesta, Paul H., 1983. "The wealth effect of merger activity and the objective functions of merging firms," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 155-181, April. [Downloadable!] (restricted)
  17. Dennis C. Mueller & Mark L. Sirower, 2003. "The causes of mergers: tests based on the gains to acquiring firms' shareholders and the size of premia," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 24(5), pages 373-391. [Downloadable!]
  18. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 2000. "Agency Problems and Dividend Policies around the World," Journal of Finance, American Finance Association, vol. 55(1), pages 1-33, 02. [Downloadable!] (restricted)
    Other versions:
  19. Franks, Julian & Harris, Robert & Titman, Sheridan, 1991. "The postmerger share-price performance of acquiring firms," Journal of Financial Economics, Elsevier, vol. 29(1), pages 81-96, March. [Downloadable!] (restricted)
  20. Berkovitch, Elazar & Narayanan, M. P., 1993. "Motives for Takeovers: An Empirical Investigation," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 28(03), pages 347-362, September. [Downloadable!]
  21. Langetieg, Terence C., 1978. "An application of a three-factor performance index to measure stockholder gains from merger," Journal of Financial Economics, Elsevier, vol. 6(4), pages 365-383, December. [Downloadable!] (restricted)
  22. Eckbo, B. Espen & Thorburn, Karin S., 2000. "Gains to Bidder Firms Revisited: Domestic and Foreign Acquisitions in Canada," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 35(01), pages 1-25, March. [Downloadable!]
  23. Harford, Jarrad, 2005. "What drives merger waves?," Journal of Financial Economics, Elsevier, vol. 77(3), pages 529-560, September. [Downloadable!] (restricted)
  24. Mara Faccio & Larry H. P. Lang & Leslie Young, 2001. "Dividends and Expropriation," American Economic Review, American Economic Association, vol. 91(1), pages 54-78, March. [Downloadable!] (restricted)
  25. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 2000. "Investor protection and corporate governance," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 3-27. [Downloadable!] (restricted)
    Other versions:
  26. Maquieira, Carlos P. & Megginson, William L. & Nail, Lance, 1998. "Wealth creation versus wealth redistributions in pure stock-for-stock mergers1," Journal of Financial Economics, Elsevier, vol. 48(1), pages 3-33, April. [Downloadable!] (restricted)
Full references

Statistics
Access and download statistics

Did you know? To receive notification of recent additions to the database, subscribe to the free NEP reports.

This page was last updated on 2009-11-29.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.