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Do Target-Country Legal Institutions Affect Cross-Border Mergers and Acquisitions? : A Quantitative Literature Survey

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  • Brada, Josef C.
  • Iwasaki, Ichiro

Abstract

We undertake a meta-analysis of 1296 estimates of the effect of target country legal environments on cross-border mergers and acquisitions (CBMAs) compiled from 60 published studies. Although these studies provide effect estimates that are statistically significant, none of the legal variables considered, save civil law, has an effect on either CBMA intensity or the CBMA premium that is large enough to be meaningful. Thus, the studies fail to provide support for legal origins theory or for theories based on cultural distance as explanations for CBMA activity. Studies of the CBMA premium are plagued by inadequate statistical power, by unexplained interstudy differences in effect and by publication-selection bias. Based on our meta-analysis, we suggest reasons why the empirical evidence fails to support theories that have wide acceptance.

Suggested Citation

  • Brada, Josef C. & Iwasaki, Ichiro, 2022. "Do Target-Country Legal Institutions Affect Cross-Border Mergers and Acquisitions? : A Quantitative Literature Survey," CEI Working Paper Series 2022-04, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hit:hitcei:2022-04
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    More about this item

    Keywords

    foreign direct investment; mergers and acquisitions; legal environment; meta-analysis; capital flows;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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