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

  • Rui Albuquerque
  • Luis Brandao-Marques
  • Miguel A. Ferreira
  • Pedro Matos

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.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 13/234.

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Length: 41
Date of creation: 12 Nov 2013
Date of revision:
Handle: RePEc:imf:imfwpa:13/234
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  1. Bris, Arturo & Brisley, Neil & Cabolis, Christos, 2008. "Adopting better corporate governance: Evidence from cross-border mergers," Journal of Corporate Finance, Elsevier, vol. 14(3), pages 224-240, June.
  2. Haddad, Mona & Harrison, Ann, 1993. "Are there positive spillovers from direct foreign investment? : Evidence from panel data for Morocco," Journal of Development Economics, Elsevier, vol. 42(1), pages 51-74, October.
  3. Ann E. Harrison & Brian J. Aitken, 1999. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," American Economic Review, American Economic Association, vol. 89(3), pages 605-618, June.
  4. Jonathan E. Haskel & Sonia C. Pereira & Matthew J. Slaughter, 2002. "Does Inward Foreign Direct Investment Boost the Productivity of Domestic Firms?," NBER Working Papers 8724, National Bureau of Economic Research, Inc.
  5. David L. Dicks, 2012. "Executive Compensation and the Role for Corporate Governance Regulation," Review of Financial Studies, Society for Financial Studies, vol. 25(6), pages 1971-2004.
  6. Arturo Bris & Christos Cabolis, 2008. "The Value of Investor Protection: Firm Evidence from Cross-Border Mergers," Review of Financial Studies, Society for Financial Studies, vol. 21(2), pages 605-648, April.
  7. Chad Syverson, 2011. "What Determines Productivity?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 326-65, June.
  8. Shleifer, Andrei & Wolfenzon, Daniel, 2002. "Investor protection and equity markets," Journal of Financial Economics, Elsevier, vol. 66(1), pages 3-27, October.
  9. Aggarwal, Reena & Erel, Isil & Ferreira, Miguel & Matos, Pedro, 2011. "Does governance travel around the world? Evidence from institutional investors," Journal of Financial Economics, Elsevier, vol. 100(1), pages 154-181, April.
  10. Jarrad Harford, 1999. "Corporate Cash Reserves and Acquisitions," Journal of Finance, American Finance Association, vol. 54(6), pages 1969-1997, December.
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