Regulatory change and corporate acquisitions

Abstract

This thesis investigates the impact on foreign investment activities of the equity market liberalization introduced in response to the 1997 crisis, which primarily involves the relaxation of the foreign ownership restrictions as well as improvements in corporate governance practices. These regulatory changes, which occurred in Indonesia, the Philippines, Malaysia, and Thailand, should have resulted in a lower amount of frictions in the capital market. With this lowering of frictions, we should observe higher gains from cross-border corporate acquisitions in addition to a higher volume of cross-border acquisitions. When I use combined announcement excess returns to measure acquisition gains, I find that merger gains from cross border corporate acquisitions are not significantly higher after the liberalization. Similarly, when I use country-level deal value on a per capita basis to measure merger volume, I find that the volume of cross border acquisitions is not significantly higher after the liberalization.