Cross-border Mergers and Acquisitions in different legal environments

The aim of this paper is to analyze the influence of the legal and institutional environment on bidder firm returns around the announcement date of cross-border Mergers and Acquisitions (M&As). The database includes 469 M&As of European (221 cross-border and 248 domestic) listed firms, with target firms being worldwide public or private firms (40 countries), over the 2002–2006 period.Shareholders of acquiring firms place greater value on cross-border M&A announcements than on domestic ones. The stronger (weaker) the legal and institutional environment of the acquirer firm country in comparison with that of the target firm country, the more positive (negative) the effect on acquiring-firm shareholders’ valuation of M&As.