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Rule of law or country level corporate governance: What matters more in emerging market acquisitions?
Published in Elsevier Ltd
2016
Volume: 37
   
Pages: 448 - 463
Abstract
A study of post-acquisition performance of cross border acquisitions involving emerging market firms shows that when developed market firms acquire emerging market firms, rule of law in the target country has a significant favorable impact on post-acquisition performance; while country level corporate governance has no impact. Contrarily, when emerging market firms acquire developed market firms, country level corporate governance in the target country has a significant adverse impact on post-acquisition performance, while rule of law has no impact. We provide evidence that if rule of law in the emerging market target country is less evolved but not dismally low, the developed market acquirer can seize the opportunity to enforce better discipline at the firm level in the target firm and thereby enhance post-acquisition performance. However, in the case of emerging market firms' acquisitions, lower the difference in country level corporate governance, superior gains are assured. The study provides evidence that location level factors affect post acquisition performance differently for ADTE and AETD acquisitions and ADTE acquisitions give importance to rule of law, while AETD acquisitions emphasis on corporate governance factors to ensure value creation in acquisitions and the results are robust after controlling for country effects and year effects. © 2016 Elsevier B.V.
About the journal
JournalData powered by TypesetResearch in International Business and Finance
PublisherData powered by TypesetElsevier Ltd
ISSN02755319
Open AccessNo