Applying the Gravity Model to Analysis of Corporate Governance in Mergers and Acquisitions in Latin America

By Mateo Vasco, Lina Cortes, Sandra Constanza Gaitan Riaño (Universidad EAFIT) & Ivan Duran (Prince Sultan University)

In this study we analyze whether transnational mergers and acquisitions (M&As) are influenced by country level corporate governance standards. For this purpose, we use a gravity model. Additionally, this study focuses only on the M&As flows from the OECD countries towards Latin American economies, and we use the Kaufmann indicators as measures of country level corporate governance, among others. We find evidence that the gravity model is explicative of the M&As flows, and that the higher the level of corporate governance at both origin and destination countries, the greater the M&As activity.

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