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Board participation, toeholds and the cross-border effect

Journal article
Authors Mattias Hamberg
Conny Overland
Björn Lantz
Published in International Business Review
Volume 22
Issue 5
Pages 868–882
ISSN 0969-5931
Publication year 2013
Published at Department of Business Administration, Industrial and Financial Management & Logistics
Centre for Finance
Pages 868–882
Language en
Keywords Board participation, Cross-border acquisitions, Cross-border effect, Toeholds, Sweden
Subject categories Business Administration


Research shows that the bid announcement return (BAR) of the acquiring firm is lower for cross-border than domestic acquisition announcements. The current lack of economically based explanations for this effect, labeled the cross-border effect by Moeller and Schlingemann (2005), motivates our study. We use unique hand-collected corporate governance data to study how the relationships between acquiring and target firms prior to a bid announcement affect the cross-border effect. Our tests show that non-operating associations between the acquiring and target firms, in the form of board participation and toeholds, have a positive effect on the BAR. The cross-border effect disappears when we control for board participation and toeholds. Thus, we suggest that the cross-border effect is at least partly a consequence of information asymmetries and the adverse selection problem that they generate.

Page Manager: Webmaster|Last update: 9/11/2012

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