Corporate Governance and Cross-Border Acquiree Returns

Abstract

The theory of corporate governance suggests that managers of poorly governed firms are more likely to make poor investment decisions, and the evidence on high antitakeover provision (ATP) firms is consistent. We study the e ffect of domestic and foreign takeovers by U.S. fi rms and find that high-ATP bidders tend to pay relatively high premiums for either targets. While this suggests that these firms make poor decisions, high-ATP bidders also experience relatively high event study returns at times of foreign takeover news. This contradicts the findings of Masulis et al. (2007) for domestic takeovers.