Corporate governance and the returns to acquiring firms' shareholders: an international comparison

Abstract

We examine the effects of mergers on the returns to acquiring companies' shareholders for a large sample of companies from both Anglo-Saxon and non-Anglo-Saxon countries over the 1980s and 1990s. With the important exception of Japan, we find similar patterns of returns across both types of countries. For a sample of 9733 acquiring companies the mean percentage gain over a short window of 21 days is 0.6%. This picture changes dramatically as the market has more time to evaluate the mergers and|or the acquiring firms. After three years, acquirers' shareholders in the United States and continental Europe lost on average 19% of their market value compared to a portfolio of non-merging firms in their size deciles and their two-digit industry, in Canada, Australia and New Zealand roughly 16%, and in the four Scandinavian countries almost 15%. Further analysis indicates that some mergers are consistent with the hypothesis that mergers generate synergies, but that a majority of mergers in Continental Europe are explained by the managerial discretion and|or hubris hypothesis. Our findings also suggest that corporate governance institutions in the United States and the other Anglo-Saxon countries lead to better investment performance than in continental Europe, when one confines one's attention to mergers. Copyright © 2007 John Wiley & Sons, Ltd.

Insider ownership, ownership concentration and investment performance: An international comparison

“…9). 8 For evidence that the losses to acquirers' shareholders are proportional to the gains to the targets, seeMueller and Sirower (2003) andMueller and Yurtoglu (2007).…”

Influence of Mergers and Acquisitions on New Technology Adoption by Mobile Network Operators in Ghana

“…The separation of capital and control is an incentive for managers to strive for their own interests. In this case, a reason for a merger may be 'Empire Building', where managers strive to expand the size of the company (Mueller & Yurtoglu, 2007). For instance, a big global company gives more status and managerial salary is positively related to the size of the company.…”

Corporate Governance and Neoclassical Economics

“…They reported only one significant estimate: -61.2% for mergers during the 1960s stock market boom (1966)(1967)(1968)(1969). 8 Burcin Yurtoglu and I estimated wealth losses to acquirers for mergers during the 1990s stock market rally of -19% (Mueller and Yurtoglu 2007). Moeller, Schlingermann, and Stulz (2005) reported wealth losses of -12% for mergers taking place during this rally (1998)(1999)(2000)(2001), a figure that destroyed $240 billion in acquiring firms' shareholders wealth.…”