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The wealth effects of acquiring foreign government-owned corporations: evidence from US-listed acquirers in cross-border mergers and acquisitions

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  • Surendranath R. Jory
  • Thanh N. Ngo

Abstract

We study the short- and long-term effects of acquiring targets that are government owned, which we refer to as Government-Owned Corporations (GOCs). Our sample of acquirers consists of US-listed public corporations, while the targets are GOCs based outside the US. In comparison to acquisitions of non-GOCs, we find that the wealth effects of acquiring GOCs are more favourable. We also find that GOC targets located in countries with poorer governance characteristics positively impact the shareholders’ wealth of the acquirer. Our evidence suggests that acquirers of foreign GOCs exploit target country governance imperfections to their advantage.

Suggested Citation

  • Surendranath R. Jory & Thanh N. Ngo, 2011. "The wealth effects of acquiring foreign government-owned corporations: evidence from US-listed acquirers in cross-border mergers and acquisitions," Applied Financial Economics, Taylor & Francis Journals, vol. 21(24), pages 1859-1872, December.
    • Handle: RePEc:taf:apfiec:v:21:y:2011:i:24:p:1859-1872
    DOI: 10.1080/09603107.2011.595680
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    Cited by:

    1. 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.
    2. Nurhazrina Mat Rahim & Ruhani Hj. Ali, 2018. "The Role of Country-Level Differences in Influencing ASEAN Firms’ Cross-Border Mergers and Acquisitions (CBMAs) Success," Capital Markets Review, Malaysian Finance Association, vol. 26(1), pages 36-55.
    3. 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.
    4. Jory, Surendranath R. & Ngo, Thanh N. & Wang, Daphne, 2016. "Credit ratings and the premiums paid in mergers and acquisitions," Journal of Empirical Finance, Elsevier, vol. 39(PA), pages 93-104.

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