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The Value of Investor Protection: Firm Evidence from Cross-Border Mergers

  • Arturo Bris
  • Christos Cabolis

International law prescribes that in a cross-border acquisition of 100% of the target shares, the target firm becomes a national of the country of the acquiror, and consequently subject to its corporate governance system. Therefore, cross-border mergers provide a natural experiment to analyze the effects of changes in corporate governance on firm value. We construct measures of the change in investor protection in a sample of 506 acquisitions from 39 countries. We find that the better the shareholder protection and accounting standards in the acquiror's country, the higher the merger premium in cross-border mergers relative to matching domestic acquisitions. 2008 London Mathematical Society, Oxford University Press.

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Article provided by Society for Financial Studies in its journal Review of Financial Studies.

Volume (Year): 21 (2008)
Issue (Month): 2 (April)
Pages: 605-648

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Handle: RePEc:oup:rfinst:v:21:y:2008:i:2:p:605-648
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