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Corporate Governance and Merger and Acquisition Foreign Direct Investment: Firm-level Evidence from Japanese Foreign Direct Investment into the US

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Author Info

  • Alba, Joseph D.

    (Nanyang Technological University)

  • Park, Donghyun

    (Asian Development Bank)

  • Wang, Peiming

    (Auckland University of Technology)

Abstract

Merger and acquisition (M&A) is a mechanism for promoting corporate governance suggesting that an improvement in overall corporate governance may have a negative effect on M&A activity. Since M&A foreign direct investment (FDI) is a cross-border variant of M&A, stronger corporate governance may also reduce M&A FDI. Hence, we use firm-level evidence from Japanese FDI into the United States to investigate the effect of US corporate governance on Japanese M&A FDI. Our results indicate that two landmark corporate governance regulations by the ����������������������������������������������������������US �������������������������������������������������������Securities and Exchange Commission in 1992 contributed significantly to the sharp decline in Japanese M&A FDI in the US during the 1990s. Our evidence lends some support to the notion that corporate governance may affect not only domestic M&A activity but also cross-border M&A activity. Our study also sheds light on the puzzle of why Japanese FDI into the US fell during the 1990s despite the depreciation of the US dollar.

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File URL: http://www.adb.org/Documents/Working-Papers/2009/Economics-WP147.pdf
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Bibliographic Info

Paper provided by Asian Development Bank in its series ADB Economics Working Paper Series with number 147.

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Length: 21 pages
Date of creation: Feb 2009
Date of revision:
Handle: RePEc:ris:adbewp:0147

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Related research

Keywords: Corporate governance; Merger and acquisition; FDI;

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References

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  1. Michael W. Klein & Eric Rosengren, 1992. "The Real Exchange Rate and Foreign Direct Investment in the United States: Relative Wealth vs. Relative Wage Effects," NBER Working Papers 4192, National Bureau of Economic Research, Inc.
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  4. Gibson, Michael S, 1995. "Can Bank Health Affect Investment? Evidence from Japan," The Journal of Business, University of Chicago Press, vol. 68(3), pages 281-308, July.
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  7. Alba, Joseph D. & Wang, Peiming, 2007. "Relative Access to Credit, Relative Wealth and FDI: Firm-Level Evidence from Japanese FDI into the United States," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 22, pages 231-255.
  8. Stein, Jeremy C., 2003. "Agency, information and corporate investment," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 2, pages 111-165 Elsevier.
  9. Freund, Deborah A. & Kniesner, Thomas J. & LoSasso, Anthony T., 1999. "Dealing with the common econometric problems of count data with excess zeros, endogenous treatment effects, and attrition bias," Economics Letters, Elsevier, vol. 62(1), pages 7-12, January.
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  12. List, John A., 2001. "US county-level determinants of inbound FDI: evidence from a two-step modified count data model," International Journal of Industrial Organization, Elsevier, vol. 19(6), pages 953-973, May.
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Cited by:
  1. Lina M. Cortés & Diego A. Agudelo & Samuel Mongrut, 2012. "Waves and determinants in the activity of Mergers and Acquisitions: The Case of Latin America," DOCUMENTOS DE TRABAJO CIEF 010658, UNIVERSIDAD EAFIT.
  2. Mateo Vasco & Lina M. Cortés & Sandra C. Gaitán & Iván A. Durán, 2012. "Aplicación del modelo gravitacional al impacto del gobierno corporativo en las fusiones y adquisiciones en Latinoamérica," DOCUMENTOS DE TRABAJO CIEF 010709, UNIVERSIDAD EAFIT.

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