City Research Online

Abstract

We argue that investor protection changes the relative importance of productivity and scale as drivers of corporate control transfers. Using a large sample of European firms we find that control transfers are more correlated with increasing profitability and less correlated with increasing size when investor protection is strong. This suggests that improving productivity is more important as a driver of acquisitions when investor protection is strong, and alleviating financial constraints or empire building are more important when investor protection is weak. Our evidence is consistent with the idea that good investor protection promotes a more productive use of corporate assets.

Publication Type:	Article
Additional Information:	© 2017 Elsevier B.V. All rights reserved.. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
Subjects:	H Social Sciences > HG Finance
Departments:	Bayes Business School > Finance
SWORD Depositor:	Symplectic Administrator

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