CROSS-BORDER M&A INFLOWS AND QUALITY OF COUNTRY GOVERNANCE: DEVELOPING VERSUS DEVELOPED COUNTRIES

This paper provides an empirical explanation to the observed disparity in cross‐border merger and acquisition inflows to developing and developed countries over the past two decades. We show two main results. First, the disparity can be attributed to the difference in the quality of institutions between the two groups of countries. Second, the gain from reforming institutions in developing countries is smaller than that in developed countries. These findings suggest that, with the current speed of institutional reforms in some developing countries, the disparity in cross‐border merger and acquisition inflows is likely to persist.