Working Paper 143 - Does Good Governance Create Value for International Acquirers in Africa: Evidence from us Acquisitions

Using a sample of US acquisitions in Africa over the last 2 decades, we assess the long term performance of international acquisitions in Africa, and the impact of firm and country level governance characteristics on reported performance. We show that acquirers do not benefit from these transactions. We also find that acquisitions made in countries characterized by strong and impartial legal systems lead to higher returns, while those observed in unstable economies generate lower returns. Interestingly, the level of corruption does not affect reported performance. Previous experience in Africa and the acquirer’s board size seem to be significant determinants of reported performance as well. Our results contrasts with the view that a strong legal framework reduces acquirers’ ability to make large returns by turning around poorly governed firms.