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Alternative paths of convergence toward U.S. market and legal regulations: Cross-listing vs. merging with U.S. bidders

Author

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  • Georgieva, Dobrina
  • Jandik, Tomas
Abstract
Non-U.S. firms can converge toward U.S. capital market and legal regulations by cross-listing in the U.S. or by being acquired by a U.S. bidder. We show companies that are smaller, have lower growth opportunities, are capital intensive, and benefit from bonding through compliance with U.S. exchange requirements are more likely to be acquired. Firms from civil law countries and countries providing stronger investor protection tend to cross-list. The adoption of Sarbanes-Oxley Act of 2002 led to an increase in the propensity to be acquired for firms from civil law countries, and to a greater rate of cross-listings for capital intensive firms. M/B values of non-U.S. firms following cross-listing in the U.S. are lower when these firms were expected to be acquired. Similarly, non-U.S. targets and U.S. bidders experience lower abnormal returns in acquisitions involving targets expected to cross-list. Our results imply the existence of optimal convergence paths for non-U.S. firms.

Suggested Citation

  • Georgieva, Dobrina & Jandik, Tomas, 2012. "Alternative paths of convergence toward U.S. market and legal regulations: Cross-listing vs. merging with U.S. bidders," Journal of Multinational Financial Management, Elsevier, vol. 22(5), pages 230-251.
    • Handle: RePEc:eee:mulfin:v:22:y:2012:i:5:p:230-251
    DOI: 10.1016/j.mulfin.2012.06.006
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    Cited by:

    1. Reddy, K. Srinivasa, 2015. "Institutional Laws, and Mergers and Acquisitions in India: A Review/Recommendation," MPRA Paper 63410, University Library of Munich, Germany, revised 2015.
    2. Li, Wanli & Wang, Chaohui & Ren, Qizhe & Zhao, Ding, 2020. "Institutional distance and cross-border M&A performance: A dynamic perspective," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 66(C).
    3. Reddy, Kotapati Srinivasa, 2015. "Extant Reviews on Entry-mode/Internationalization, Mergers & Acquisitions, and Diversification: Understanding Theories and Establishing Interdisciplinary Research," MPRA Paper 63744, University Library of Munich, Germany, revised 2015.
    4. Xie, En & Reddy, K.S. & Liang, Jie, 2017. "Country-specific determinants of cross-border mergers and acquisitions: A comprehensive review and future research directions," Journal of World Business, Elsevier, vol. 52(2), pages 127-183.

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    More about this item

    Keywords

    Cross-listing; Cross-border mergers; Bonding; Contractual and functional convergence; Sarbanes-Oxley Act;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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