Alex Lundqvist, Eva Liljeblom, Anders Löflund and Benjamin Maury
The cultural and legal differences between foreign acquirers and African target firms can be substantial. There is also a large variation in cultures and legal systems within…
Abstract
Purpose
The cultural and legal differences between foreign acquirers and African target firms can be substantial. There is also a large variation in cultures and legal systems within Africa. However, there is limited research on merger and acquisition (M&A) performance by foreign firms in Africa. The purpose of this paper is to fill this gap by exploring the “spillover by law” hypothesis (Martynova and Renneboog, 2008) that focuses on the influence of the external environment on the governance and performance of foreign M&As in Africa.
Design/methodology/approach
The data set covers 415 M&A transactions by foreign firms in Africa during the period of 1999–2016. Dynamic data covering the country’s legal, cultural and political environment are collected from the World Bank, the Heritage Foundation and Transparency International.
Findings
The authors find that the legal environment significantly affects the returns of bidders on African firms. For complete acquisitions, bidder returns are significantly higher when the bidder’s country has higher shareholder protection and higher creditor protection compared with the target firm’s country. The results show that the effects are significant when there is a full control change (including a change in the target firm’s nationality) but not in the case of partial control transfers. The results are consistent with the “spillover by law” hypothesis.
Originality/value
The authors contribute to the literature on cross-border M&As by separately studying the valuation effects of full, majority and minority changes in control; by being the first study of the legal spillover effects in Africa; and by being the most extensive study of the legal determinants of the valuations of non-African acquirers of African firms.
Details
Keywords
Steven Graham and Wendy L. Pirie
The fact that stocks going ex‐dividend decline in price by less than the dividend amount is theoretically attributed to the differential taxation of dividend and capital gains or…
Abstract
The fact that stocks going ex‐dividend decline in price by less than the dividend amount is theoretically attributed to the differential taxation of dividend and capital gains or the differential taxation of investor groups. NYSE, Amex and Toronto Stock Exchange listed stocks, and stocks interlisted on these three exchanges, are examined to infer the tax jurisdiction of the marginal investor. The stock price changes relative to the dividends are consistent with a tax clientele effect. Further, the stock price changes are plausible given the tax rates. Ex‐dividend day behavior is different for non‐interlisted stocks on all three exchanges, suggesting each exchange has a different tax clientele. Canadian firms interlisted on US exchanges exhibit ex‐dividend day behavior consistent with the appropriate US exchange’s non‐interlisted stocks, suggesting that the marginal investors in these stocks are American.