Does which country a seller or bidder firm operates in affect mergers and acquisitions?

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[...] Rossi and Volpin make the following statement, based on their analysis: acquirers typically come from countries with better accounting standards and stronger shareholder protection than the targets' countries.”[17] It is important to recognise that, because the continental European firm has a higher ownership concentration, a hostile takeover situation is much less likely: after all, if one person does not want to sell their majority share in a company, there is no way that the company can be taken over in a hostile bid, as Rossi and Volpin state: “Hostile takeovers require that control be contestable, a feature that is less common in countries with poorer investor protection”[18] Another factor to look at is how the takeover premium is affected by the corporate governance of the bidder and target countries. [...]

[...] Looking at the means of payment in this scenario, Rossi and Volpin state that: “Cross-border deals might be more often paid in cash because shareholders dislike receiving foreign stocks as compensation”[22] However, Rossi and Volpin go on to make the point that the shareholders in a target company are likely to accept foreign stocks if the acquirer firm's country has greater investor protection than the target's country.[23] This is presumably because the target shareholders do not want to receive foreign stocks with a high risk of being expropriated. [...]

[...] They are in fact, synonymous, and now we are able to link these four aspects of corporate governance: legal environment shapes the value of the private benefits of control and thereby determines the equilibrium ownership structures.”[14] By linking the analysis made in this section, I have made a table (Figure as a summary of the types of corporate governance. It will be useful in analysing the difference in M&A by hypothetical scenarios: UK / US Continental Europe Ownership Dispersed Concentrated concentration Investor Higher Lower protection Corporate system Market Based Bank Based Corporate law Common law Civil Law basis Figure UK/US firm acquiring a continental European firm. [...]

[...] This aspect is linked to investor protection, as Weitzel and Berns quote Glaeser and Shleifer's (2002) hypothesis that, “common law provides a better legal environment for investor protection.”[4] Weitzel and Berns also note that La Porta et al., (1998) found that countries using civil law systems tend to have more firms with high ownership concentration,[5] which is an important point, because it allows us to predict the ownership concentration of the majority of firms in a country just by noting the country's legal system Market-centered or bank-centered corporate systems As La Porta et al. [...]

[...] Available as an electronic resource in the library catalogue Alfred Rappaport and Mark Sirower (1999), “Stock or Cash? The tradeoffs for buyers and sellers in mergers and acquisitions”, reading distributed for the 3rd seminar Stefano Rossi and Paolo Volpin (2004), “Cross-country determinants of mergers and acquisitions”, Journal of Financial Economics, volume 74, pages 277-304. Available as an electronic resource in the library catalogue Utz Weitzel and Sjors Berns (2006), “Cross-border takeovers, corruption, and related aspects of governance”, Journal of International Business Studies, Volume 37, pages 786-806 Luigi Zingales (1998), it's worth being in control”, reading distributed for the 3rd seminar La Porta, R. [...]