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The Impact of Investor Protection Law on Takeovers: The Case of Leveraged Buyouts

38 Pages Posted: 5 Mar 2008 Last revised: 22 Oct 2014

See all articles by Jerry Cao

Jerry Cao

Independent

Douglas J. Cumming

Florida Atlantic University; Birmingham Business School; European Corporate Governance Institute (ECGI)

Jeremy Goh

Singapore Management University - Lee Kong Chian School of Business

Meijun Qian

Zhejiang University International Business School

Xiaoming Wang

Shanghai University of Finance and Economics

Multiple version iconThere are 2 versions of this paper

Date Written: May 2014

Abstract

This paper examines the impact of investor protection on the value creation of LBOs. We find that target shareholders’ wealth gain is higher in countries with better investor protection. The impact of investor protection on takeover premium is larger for LBO than non-LBO transactions. We also find evidence suggesting that club LBOs are not priced lower than non-club deals after accounting for endogeneity problem. These results suggest that investor protection law may act as an important safeguard for minority shareholders in LBO transactions.

Keywords: Private Equity, Leveraged Buyouts, Premium, M&A

JEL Classification: G34, G24

Suggested Citation

Cao, Jerry and Cumming, Douglas J. and Goh, Jeremy and Qian, Meijun and Wang, Xiaoming, The Impact of Investor Protection Law on Takeovers: The Case of Leveraged Buyouts (May 2014). Available at SSRN: https://ssrn.com/abstract=1100059 or http://dx.doi.org/10.2139/ssrn.1100059

Jerry Cao (Contact Author)

Independent

Douglas J. Cumming

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

HOME PAGE: http://sites.google.com/view/douglascumming/bio?authuser=0

Birmingham Business School ( email )

Edgbaston Park Road
Birmingham, B15 2TY
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://https://ecgi.global/users/douglas-cumming

Jeremy Goh

Singapore Management University - Lee Kong Chian School of Business ( email )

469 Bukit Timah Road
Singapore 912409
Singapore

Meijun Qian

Zhejiang University International Business School ( email )

718 Haizhou East Road, Xiashi
ZIBS building
Haining
China

Xiaoming Wang

Shanghai University of Finance and Economics ( email )

777 Guoding Road
Shanghai, AK Shanghai 200433
China

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