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Corporate governance and state expropriation risk

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  • Col, Burcin
  • Errunza, Vihang

Abstract

Recent studies show that the transfer of corporate governance structure across borders has significant valuation consequences. It is equally important to consider the valuation effect of state expropriation risk as well as its interaction with quality of corporate governance. Using a sample of cross-border acquisitions during 1989–2009, we find that targets, which operate under some degree of state expropriation risk, receive a significantly lower premium. The target shareholders are not fully rewarded for the improvement in firm governance since the benefits of improvement are mitigated under predation. Our results provide evidence for twin-agency theory of Stulz (2005) through cross-border mergers.

Suggested Citation

  • Col, Burcin & Errunza, Vihang, 2015. "Corporate governance and state expropriation risk," Journal of Corporate Finance, Elsevier, vol. 33(C), pages 71-84.
  • Handle: RePEc:eee:corfin:v:33:y:2015:i:c:p:71-84
    DOI: 10.1016/j.jcorpfin.2015.04.005
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    Cited by:

    1. Wiji Arulampalam & Michael P. Devereux & Federica Liberini, 2012. "Taxes and the Location of Targets," Working Papers 1213, Oxford University Centre for Business Taxation.
    2. repec:eee:jbfina:v:87:y:2018:i:c:p:446-461 is not listed on IDEAS

    More about this item

    Keywords

    Cross-border mergers; Valuation; State expropriation; Corporate governance;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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