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

Author/Editor: Rui Albuquerque ; Luis Brandao-Marques ; Miguel A. Ferreira ; Pedro Matos
Publication Date: November 12, 2013
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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.
Series: Working Paper No. 13/234
Subject(s): Foreign direct investment | Corporate governance | Spillovers | Competition

Publication Date: November 12, 2013
ISBN/ISSN: 9781475518382/1018-5941 Format: Paper
Stock No: WPIEA2013234 Pages: 41
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