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Where do Creditor Rights Matter? Creditor Rights, Political Constraints, and Cross-Border M&A Activity

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  • Martin Gassebner
  • Pierre-Guillaume Méon

Abstract

In this paper, we evaluate the impact of creditor rights and political risk on both the number and the value of cross-border M&A flows in a gravity model using a negative binomial model and Heckman’s two-stage selection model, respectively. Our results confirm that creditor-friendly rules and political risk decrease M&A inflows. The impact of formal legal rules is, however, almost entirely driven by politically stable countries, where those rules can be expected to hold. De jure rules therefore only matter where political stability is achieved.

Suggested Citation

  • Martin Gassebner & Pierre-Guillaume Méon, 2010. "Where do Creditor Rights Matter? Creditor Rights, Political Constraints, and Cross-Border M&A Activity," Working Papers CEB 10-019.RS, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:sol:wpaper:10-019
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    2. Hernandez, Diego & Rudolph, Alexandra, 2011. "Modern Day Slavery: What Drives Human Trafficking in Europe?," Proceedings of the German Development Economics Conference, Berlin 2011 83, Verein für Socialpolitik, Research Committee Development Economics.
    3. Hernandez, Diego & Rudolph, Alexandra, 2015. "Modern day slavery: What drives human trafficking in Europe?," European Journal of Political Economy, Elsevier, vol. 38(C), pages 118-139.

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    More about this item

    Keywords

    Mergers and acquisitions; multinational firms; creditor rights; political risk; gravity model.;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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