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

By Rui Albuquerque, Luis Brandão-Marques, Miguel A. Ferreira, Pedro Matos

November 12, 2013

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Rui Albuquerque, Luis Brandão-Marques, Miguel A. Ferreira, and Pedro Matos. International Corporate Governance Spillovers: Evidence from Cross-Border Mergers and Acquisitions, (USA: International Monetary Fund, 2013) accessed December 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Balance of payments, Competition, Corporate governance, Economic sectors, Financial markets, Foreign direct investment, Market capitalization, Production, Productivity

Keywords: Acquirer firm, Acquisitions, Competition, Corporate governance, Cross border mergers, Cross-border m&a, Foreign direct investment, Global, Governance attribute, Industry classification, Investor protection, Market capitalization, Panel regression, Productivity, Spillover effect, Spillovers, Target firm, WP

Publication Details

Pages:

41
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2013/234
Stock No:

WPIEA2013234
ISBN:

9781475518382
ISSN:

1018-5941

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