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

Author

Listed:
  • Rui Albuquerque
  • Mr. Luis Brandão-Marques
  • Miguel A. Ferreira
  • Pedro Matos

Abstract

We develop and test the hypothesis that foreign direct investment promotes corporate governance spillovers in the host country. Using firm-level data on cross-border mergers and acquisitions (M&A) and corporate governance in 22 countries, we find that cross-border M&As are associated with subsequent improvements in the governance, valuation, and productivity of the target firms’ local rivals. This positive spillover effect is stronger when the acquirer is from a country with stronger shareholder protection and if the target’s industry is more competitive. We conclude that the international market for corporate control promotes the adoption of better corporate governance practices around the world.

Suggested Citation

  • Rui Albuquerque & Mr. Luis Brandão-Marques & Miguel A. Ferreira & Pedro Matos, 2013. "International Corporate Governance Spillovers: Evidence from Cross-Border Mergers and Acquisitions," IMF Working Papers 2013/234, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2013/234
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    References listed on IDEAS

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    Cited by:

    1. Luc Renneboog & Peter G. Szilagyi & Cara Vansteenkiste, 2017. "Creditor rights, claims enforcement, and bond performance in mergers and acquisitions," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 48(2), pages 174-194, February.
    2. Abebe, Girum & McMillan, Margaret & Serafinelli, Michel, 2022. "Foreign direct investment and knowledge diffusion in poor locations," Journal of Development Economics, Elsevier, vol. 158(C).
    3. Yang Zhang, 2018. "Corporate Governance Effects on Risk Management and Shareholder Wealth: The Case of Mergers and Acquisitions," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 4-2018.
    4. CNV Krishnan & Jialun Wu, 2022. "Market Misreaction? Evidence from Cross-Border Acquisitions," JRFM, MDPI, vol. 15(2), pages 1-19, February.
    5. Kim, Woochan & Sung, Taeyoon & Wei, Shang-Jin, 2017. "The diffusion of corporate governance to emerging markets: Evaluating two dimensions of investor heterogeneity," Journal of International Money and Finance, Elsevier, vol. 70(C), pages 406-432.
    6. Renneboog, Luc & Vansteenkiste, Cara, 2019. "Failure and success in mergers and acquisitions," Journal of Corporate Finance, Elsevier, vol. 58(C), pages 650-699.
    7. Mr. Luis Brandão-Marques, 2016. "Stock Market Liquidity in Chile," IMF Working Papers 2016/223, International Monetary Fund.

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