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Cross‐Border Mergers and Differences in Corporate Governance
Author(s) -
Starks Laura T.,
Wei Kelsey D.
Publication year - 2013
Publication title -
international review of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.489
H-Index - 18
eISSN - 1468-2443
pISSN - 1369-412X
DOI - 10.1111/irfi.12008
Subject(s) - corporate governance , shareholder , business , stock (firearms) , valuation (finance) , accounting , monetary economics , valuation effects , mergers and acquisitions , quality (philosophy) , financial system , finance , economics , mechanical engineering , philosophy , epistemology , engineering
We examine whether corporate governance differences affect firm valuation in cross‐border mergers. We find that takeover premiums are decreasing in the quality of the foreign acquirer's home country governance for deals completed with stock, suggesting that the acquirers compensate target shareholders for the resulting exposure to inferior corporate governance regimes. Correspondingly, we find that the acquiring firm stockholders' abnormal returns at the merger announcement are increasing in the quality of corporate governance for stock offers. Finally, we find that foreign acquirers from countries with better corporate governance are more likely to make stock offers.