An International Study on Shareholder Protection in Minority M&A Transactions

Abstract

We define minority M&A transactions as those initiated by target controlling shareholders to acquire minority shareholders' ownership in the same target firm. Existing studies provide diverse evidence with regard to whether minority shareholders are expropriated by controlling shareholders in minority merger deals. Rather than studying transactions in a particular country, we use an international minority merger sample covering 55 countries. Furthermore, we examine multiple merger outcomes to present a comprehensive analysis of minority shareholder rights protection. We find, in countries with stronger corporate governance and legal enforcement, the merger premium and the probability of cash payment are higher but the deal completion rate is lower, suggesting stronger minority shareholder rights in these transactions. Our study provides new evidence of minority shareholder protection in the international scope. Our results suggest the different observation of minority shareholder protection can be attributed to the country-level corporate governance and legal enforcement.