Professor of Strategy
Corporate Governance; Value Creation, Strategy and Implementation;
The authors argue that corporate governance institutions prevalent in the countries of the merging firms shape post-acquisition asset restructuring and resource transfers . Depending on their nature, national corporate governance institutions enable or constrain the ability of the acquirer to reorganize the target.The authors predict that target asset restructuring and resource transfers are more likely to occur to the extent that the rights of the new owners are protected and that labor rights are less so. The authors also expect more experienced acquirers to be able to overcome the likely resistance of employees more easily.Using a cross-national dataset of corporate acquisitions and post-acquisition reorganization, the authors found support for the predictions that a stronger legal protection of shareholder rights in the acquirer country when compared to the target country increases the acquirer’s ability to restructure the target’s assets and leverage the target’s resources, while the protection of employee rights in the target country restricts the acquirer’s ability to restructure the target’s assets and transfer resources to and from the target.The authors also found that an acquirer’s past acquisition experience partially moderate the negative effects of target employee rights on the acquirer’s ability to reorganize the target.