Institutions and the market for corporate control in Asia: an empirical analysis

The opening of domestic financial markets to competition, and especially the removal of entry barriers to foreign investors, is generally understood to bring about significant benefits in terms of greater stability and economic growth. Yet, the liberalisation of financial markets may be hampered by interest groups which oppose competition and by unsound public policies which do not provide adequate risk protection against unwelcome market outcomes. This paper tackles the issue of whether country-level institutions play any role in the volume of financial activity. More precisely, the paper is focused on explaining the intensity of financial flows in the market for corporate control (MCC), especially in the form of mergers and acquisitions (M&A), in Asian countries. The analysis, which is conducted on M&A activity recorded in the period between 1995 and 2010 in Asian countries, supports the role played by institutions on the dynamics of the MCC.