Mergers and acquisitions: does the legal origin matter?

There are many concerns in the financial literature that law can influence the financial development of a state and the mergers and acquisitions area makes no exception. In every country's economy, the mergers and acquisitions play an important role and usually this field is governed by commercial codes and other special laws. So, governments have developed M&A laws in order to expand the states economies and enhance business performances, thus maintaining proper competitive environments for improving business performances. The study aim is to show that the legal origin ()fa state can influence the characteristics of mergers and acquisitions both in terms of turnover and size of control premium. The database is provided by Zephyr and SDC International M&A and includes aggregated data on acquisitions and mergers for the 2006 2010 periods in all countries of the world. We analyzed 30 countries from 4 different legal systems: common law on one hand and French, German and Scandinavian civil law on the other hand. In order to analyze the relation between the characteristics of a state's M&A market and the legal might of a state, we conducted several regression models. The M&A market was explained by the average value of a transaction and the size of the control premium, and for the legal system we considered several variables besides the dummy variables for each legal system. To do this, we analyzed business indicators that show how attractive is the legal system of a country for investors. For example, common law countries are considered to be business friendly, so a low number of tax payments and a low number of days required to start a business is recorded in these states. There is an opposite situation in the French and German civil law countries. The results show that a country's mergers and acquisitions market is influenced by the business environment that the law can create for investors who are likely to invest more in a well regulated markets which can protect the their capital, but also can provide an excellent environment for development and capital gains. (C) 2015 The Authors. Published by Elsevier B.V.