AIB 2012 Conference Proceedings - Academy of International ...

MONDAY
The Impact of Double Taxation Treaties on Cross Border Portfolio Equity Flows, Corporate Equity Valuations and
Firms' Cost of Equity Capital
Bhavik Parikh, University of Memphis
Pankaj Jain, University of Memphis
Ronald Spahr, University of Memphis
Bilateral double taxation treaties (DTTs) have become very popular in recent years with over 2,289 treaties in
place at the end of 2008. We find that inter country portfolio investment flows increase by 48.53% when
countries sign DTTs. DTTs are also associated with an increase in corporate equity valuation, and appear to be
a factor in lowering firms' cost of equity capital in the treaty countries by approximately 0.012% per annum.
These positive effects of DTT are robust in multivariate regression models with country fixed effects, differences
in corporate tax rates, and other control variables. (For more information, please contact: Bhavik Parikh,
University of Memphis, USA: brparikh@memphis.edu)
Corporate Governance, Board Networks and Firm Performance
Deeksha A. Singh, Temple University
In this paper I use an integration of agency theory with resource dependence view to examine the performance
consequences of board structure, network centrality and ownership structure in case of emerging economy
firms. I also investigate the contingency conditions which make board independence less or more valuable for
emerging economy firms. Empirical findings based on the panel data analysis of 17,967 observations over a
nine year period from 2001 to 2009 support all my hypotheses. I find that family ownership, presence of
independent directors and separation of the role of CEO from board chair are positively related to firm
performance. Additionally, directors also help firms become central in the network of other firms, and firms that
are more central in a network outperform those that are less central. Board independence also interacts with
family ownership and network centrality in affecting firm performance. (For more information, please contact:
Deeksha A. Singh, Temple University, USA: deeksha@temple.edu)
The Exchange Rate as a Determinant of Cross-Border Mergers and Acquisitions
Wenjie Chen, George Washington University
Theoretical and empirical studies have generated mixed support for a link between exchange rates and foreign
direct investment. Most existing studies lack the detail and quality of data that satisfy the stringent assumptions
of the theoretical models. Moreover, the majority of empirical works has been exclusively conducted on US
data, although a large share of FDI occurs outside of the US. Using transaction-specific data on worldwide
cross-border mergers and acquisitions (M&A) between 1990 and 2009, this paper reexamines the relationship
between bilateral exchange rate and FDI. The empirical analysis uses various econometric specifications and
exploits the rich features of the M&A data that are closer to the underlying assumptions of theoretical models. I
find strong evidence for a link between exchange rates and FDI. A depreciation in a home country's currency
against a foreign country is accompanied by increased inflows of cross-border M&A from the foreign into the
home country. This link between exchange rates and acquisition FDI is particularly strong in the case of target
firms that are in the high-tech industry as well as for firms that are more prone to face credit constraints and
asymmetric information; both features that have been predicted in the theoretical literature. (For more
information, please contact: Wenjie Chen, George Washington University, USA: chenw@gwu.edu)
AIB 2012 Conference Proceedings
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