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Legal Environment, Internalization, And U.S. Acquirer Gains In Foreign Takeovers

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  • Christos Pantzalis
  • Jung Chul Park
  • Ninon K. Sutton

Abstract

In examining takeovers of foreign targets by U.S. firms, we investigate the effect of the target country's legal environment on acquiring firm value. Our results indicate that acquirers of target firms located in civil law countries experience significant positive abnormal returns, especially when the acquirer possesses a high level of intangibles. Furthermore, we find that acquirers with high levels of intangibles are more likely to acquire target firms in civil law countries. These findings suggest that the transfer of intangibles overseas provides relatively larger efficiency benefits for multinational corporations in cases where the alternative, contracting in external markets, is more difficult.

Suggested Citation

  • Christos Pantzalis & Jung Chul Park & Ninon K. Sutton, 2008. "Legal Environment, Internalization, And U.S. Acquirer Gains In Foreign Takeovers," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 31(2), pages 167-191, June.
    • Handle: RePEc:bla:jfnres:v:31:y:2008:i:2:p:167-191
    DOI: 10.1111/j.1475-6803.2008.00236.x
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    Cited by:

    1. Halabi, Hussein & Alshehabi, Ahmad & Wood, Geoffrey & Khan, Zaheer & Afrifa, Godfred, 2021. "The impact of international diversification on credit scores: Evidence from the UK," International Business Review, Elsevier, vol. 30(6).
    2. Yun Meng & Ninon K. Sutton, 2017. "Is the grass on the other side greener? Testing the cross-border effect for U.S. acquirers," Review of Quantitative Finance and Accounting, Springer, vol. 48(4), pages 917-937, May.

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