Firm size, sovereign governance, and value creation: Evidence from the acquirer size effect
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|Title:||Firm size, sovereign governance, and value creation: Evidence from the acquirer size effect||Authors:||Humphery-Jenner, Mark
|Permanent link:||http://hdl.handle.net/10197/7492||Date:||Jun-2014||Online since:||2016-02-12T15:30:00Z||Abstract:||This paper examines the relationship between acquirer size, sovereign governance, and value-creation in acquisitions. Prior literature indicates that larger acquirers' acquisitions create less shareholder wealth in developed markets, arising primarily from agency and entrenchment problems. However, in weak governance environments, size might have off-setting benefits, including increased market power and political connections. We use a sample of 17,647 takeovers from 45 countries to examine the acquirer size effect around the world. We find that the acquirer size effect exists internationally, but is smaller in magnitude in weak governance markets. Compared with larger acquirers in strong governance countries, large acquirers in weak governance countries do takeovers that generate higher stock-returns and increase post-takeover operating performance. Their deals are also more likely to be friendly, and take less time to complete. We also find that the benefits of larger acquirer size increase with the importance of political connections in the acquirer's country. The results suggest that country-governance can moderate the impact of corporate characteristics, such as corporate size.||Type of material:||Journal Article||Publisher:||Elsevier||Journal:||Journal of Corporate Finance||Volume:||26||Start page:||57||End page:||77||Copyright (published version):||2014 Elsevier||Keywords:||Governance; Regulation; Takeovers; Size-effect||DOI:||10.1016/j.jcorpfin.2014.02.009||Language:||en||Status of Item:||Peer reviewed|
|Appears in Collections:||Business Research Collection|
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