de Jong, Abe --- "Comment – Discussion of ‘Spillover of Corporate Governance Standards in Cross-Border Mergers and Acquisitions’ by Marina Martynova and Luc Renneboog" [2010] ELECD 401; in Pacces, M. Alessio (ed), "The Law and Economics of Corporate Governance" (Edward Elgar Publishing, 2010)

Book Title: The Law and Economics of Corporate Governance

Editor(s): Pacces, M. Alessio

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781848448971

Section Title: Comment – Discussion of ‘Spillover of Corporate Governance Standards in Cross-Border Mergers and Acquisitions’ by Marina Martynova and Luc Renneboog

Author(s): de Jong, Abe

Number of pages: 6

Extract:

Comment ­ Discussion of `Spillover of
corporate governance standards in cross-
border mergers and acquisitions' by
Marina Martynova and Luc Renneboog
Abe de Jong

INTRODUCTION

The corporate governance structures and practices in companies are
strongly influenced by the countries where firms are incorporated. Legal
rights for shareholders, creditors and directors, the enforcement of these
rights and prevailing practices determine the strengths of a country's gov-
ernance regime. Cross-border mergers and acquisitions (M&As) provide
a fascinating experiment where firms may face dramatic changes in their
governance regimes. The acquired firm from a foreign country becomes
subject to the governance regime of the domestic acquiring company. In
their contribution to this volume, Martynova and Renneboog exploit the
governance regime changes in this setting and empirically describe the
value relevance of governance regime shifts and resulting spillover effects.
Martynova and Renneboog investigate cross-border acquisitions because
the governance structures of the acquiring and acquired firms influence the
valuation effects in the acquisitions. The idea is that acquirers from coun-
tries with strongly shareholder-oriented governance regimes will impose
this regime on target companies from countries with weaker regimes. The
authors refer to this hypothesis as the positive spillover by law hypothesis
in full takeovers. For partial acquisitions, the spillover effect is expected to
occur on a voluntary basis, which is referred to as the (positive) spillover by
control hypothesis. Where the acquiring company is from a country with
a weaker regime, the reasoning inverts. This leads to the negative spillover
by ...