The impact of investor protection law on global takeovers: LBO vs. non-LBO transactions

• Main Authors: CAO, Xiaping, CUMMINGS, Douglas, GOH, Jeremy C., WANG, Xiaoming
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2020
• Subjects: Leveraged buyouts; Legal environment; Law; Premium; Shareholder rights; Club deals; Value effect; Investor protection; Corporate Finance; Finance and Financial Management
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/6683; https://ink.library.smu.edu.sg/context/lkcsb_research/article/7682/viewcontent/Impact_investor_protection_law_LBO_2019_av.pdf
• Institution: Singapore Management University

This paper examines the impact of investor protection laws on value creation in LBOs versus non-LBO takeovers. We find that value creation measured by takeover premium is significantly higher in countries with better investor protection. The value effect of investor protection laws is more pronounced for LBOs than non-LBO takeover transactions. Among LBOs, investor protection’s value effect is lower for club deals than others. These results suggest that institutional context and legal environment determine the extent of value creation for takeovers around the world.