This paper investigates how the gap in investor protection (IP) of capital exporting and importing countries affect firm-level international capital flows. A simple model illustrates that when a capital exporting country has stronger IP than the importing country, foreign acquirers tend to target better-performing firms. This cherry picking tendency becomes stronger (weaker) when the gap in IP increases (decreases). Data on acquisition bids from 17 strong-IP countries for firms located in 18 weak-IP countries reveal that the cherry picking tendency declines after target countries undertake corporate governance reforms (CGRs), which narrow the gap in IP between the acquirer and target countries. In contrast, foreign acquirers respond to CGRs enacted by their own countries by increasing their cherry picking tendencies. These results imply that the gap in the strength of IP between acquirer and target countries prevent underperforming firms in weak-IP countries from gaining access to foreign capital and knowhow.
JEL: Classification: F21, F23, G34, G38, G39.
Keywords: International Capital Flows, Corporate Governance Reforms, Cross-border Acquisitions, Target Selections, Investor Protection, Private Benefits of Control and Control Premiums
학회소식
학회소식
[2010년 제 4차] Corporate Governance Reforms and Firm-Level Allocat
작성자 : 관리자
조회수 : 730
게시일 :
2010-12-09