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Corporate governance and merger and acquisition (M&A) FDI: Firm-level evidence from Japanese FDI into the US

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  • Alba, Joseph D.
  • Park, Donghyun
  • Wang, Peiming

Abstract

Merger and acquisition (M&A) is a mechanism for promoting corporate governance. This suggests that an improvement in overall corporate governance may have a negative effect on M&A activity. Since M&A foreign direct investment (FDI) is a cross-border variant of M&A, we use firm-level data to investigate the effect of US corporate governance on Japanese M&A FDI. Our results indicate that two landmark corporate governance regulations by the US Securities and Exchange Commission (SEC) in 1992 contributed significantly to the sharp decline in Japanese M&A FDI in the US during the 1990s. Our evidence lends some support to the notion that corporate governance may affect not only domestic M&A activity but also cross-border M&A activity. Our study also sheds some light on the puzzle of why Japanese FDI into the US fell during the 1990s despite the depreciation of the US dollar.

Suggested Citation

  • Alba, Joseph D. & Park, Donghyun & Wang, Peiming, 2009. "Corporate governance and merger and acquisition (M&A) FDI: Firm-level evidence from Japanese FDI into the US," Journal of Multinational Financial Management, Elsevier, vol. 19(1), pages 1-11, February.
    • Handle: RePEc:eee:mulfin:v:19:y:2009:i:1:p:1-11
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    3. Reddy, Kotapati Srinivasa, 2015. "Revisiting and Reinforcing the Farmers Fox Theory: A Study (Test) of Three Cases in Cross-border Inbound Acquisitions," MPRA Paper 63561, University Library of Munich, Germany, revised 2015.
    4. Chen, Zhongfei & Wanke, Peter & Tsionas, Mike G., 2018. "Assessing the strategic fit of potential M&As in Chinese banking: A novel Bayesian stochastic frontier approach," Economic Modelling, Elsevier, vol. 73(C), pages 254-263.
    5. Reddy, Kotapati Srinivasa, 2015. "Determinants of Cross-border Mergers and Acquisitions: A Comprehensive Review and Future Direction," MPRA Paper 63969, University Library of Munich, Germany, revised 2015.
    6. Nurhazrina Mat Rahim & Ruhani Ali, 2016. "Cross-Border Mergers and Acquisitions (CBMAs): A Review on Top Six ASEAN Country CBMA Players," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 12(Suppl. 1), pages 123–158-1.
    7. Wang, Peiming & Alba, Joseph D. & Park, Donghyun, 2012. "Corporate governance and FDI: Firm-level evidence from Japanese FDI into the US," International Review of Economics & Finance, Elsevier, vol. 24(C), pages 43-50.
    8. Wanke, Peter & Maredza, Andrew & Gupta, Rangan, 2017. "Merger and acquisitions in South African banking: A network DEA model," Research in International Business and Finance, Elsevier, vol. 41(C), pages 362-376.
    9. Goodness C. Aye & Giray Gozgor & Rangan Gupta, 2020. "Dynamic and Asymmetric Response of Inequality to Income Volatility: The Case of the United Kingdom," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 147(3), pages 747-762, February.
    10. Xie, En & Reddy, K.S. & Liang, Jie, 2017. "Country-specific determinants of cross-border mergers and acquisitions: A comprehensive review and future research directions," Journal of World Business, Elsevier, vol. 52(2), pages 127-183.

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