Does Takeover Activity Cause Managerial Discipline? Evidence from International M&amp;A Laws

Lel, Uǧur; Miller, Darius P.

doi:10.1093/rfs/hhv002

Cited by 173 publications

(110 citation statements)

References 64 publications

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“…Hirshleifer and Thakor [] model the so‐called “kick‐in‐the‐pants” effect, whereby the threat of takeover forces the board to discipline poorly performing managers; otherwise the board may have to pay a “personal price” for being lenient. In support of the positive effects of corporate control market on board monitoring, Lel and Miller [] show greater firm‐level directorial oversight, measured by improvements in executive turnover‐performance elasticity, after the firm's home country adopts M&A laws.…”

Section: Institutional Background and Hypothesis Developmentmentioning

confidence: 99%

“…In theory, since directors do not fully internalize the benefits of costly monitoring, they tend to avoid the effort unless there is external impetus, such as a takeover bid (Shleifer and Vishny [], Kumar and Sivaramakrishnan []). Lel and Miller [] find that directors are more likely to lose board seats following corporate control events and that country‐level M&A law enactment improves directorial oversight. Ahmed and Duellman [] show that directors characterized as more vigilant monitors, such as outside directors owning a larger share of the firm, prefer management to report more conservatively.…”

Section: Introductionmentioning

confidence: 99%

“…Nenova [] shows that takeover laws facilitate an orderly process of changes in corporate control as well as fair treatment of all existing shareholders. Lel and Miller [] find that enacting international M&A laws increases the sensitivity of CEO turnover to firm underperformance, especially in countries with weaker legal institutions. Glendening, Khurana and Wang [] find that M&A law enactments decrease firms’ need to issue dividends by enhancing monitoring intensity on managers.…”

Section: Introductionmentioning

confidence: 99%

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International Mergers and Acquisitions Laws, the Market for Corporate Control, and Accounting Conservatism

Khurana

Wang

2018

J of Accounting Research

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Exploiting the staggered enactment of country‐level mergers and acquisitions (M&A) law as an exogenous increase in corporate takeover threat, this paper examines how a disciplinary market for corporate control affects accounting conservatism. Following M&A law adoption, we find increased accounting conservatism, with more pronounced effects in countries with weak shareholder protection and in those experiencing larger growth in takeover activity. Further analysis reveals that elevated takeover threats increase conservatism through changes in capital structure and investment decisions as well as improvements in board monitoring. Our findings highlight the importance of the market for corporate control in shaping financial‐reporting outcome.

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Section: Institutional Background and Hypothesis Developmentmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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International Mergers and Acquisitions Laws, the Market for Corporate Control, and Accounting Conservatism

Khurana

Wang

2018

J of Accounting Research

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“…Previous studies find that at the aggregate level, the volumes of cross-border merger are driven by country factors such as accounting standards, corporate governance, investor protection (Rossi and Volpin 2004;Martynova and Renneboog 2008), taxation (Scholes and Wolfson 1990;Huizinga and Voget 2009), culture (Ahern, Daminelli, and Fracassi 2015), as well as geographical distance, quality of accounting disclosure, and bilateral trade (Erel, Liao, and Weisbach 2014). At the firm level, cross-border mergers create value by binding targets from countries with lower standards of corporate governance and investor protection with the higher standards in bidders' countries (Bris, Brisley, and Cabolis 2008;, governing targets by foreign institutional investors (Ferreira, Massa, and Matos 2010), and disciplining poorly performing CEOs in countries with weak investor protection (Lel and Miller 2015). Our results show that corporate pension plans induce firms to invest abroad but the motivations are more complicated than reducing labor influence through shifting assets abroad or to other industries.…”

Section: Introductionmentioning

confidence: 78%

“…find that bidders from countries with better shareholder protection and accounting standards pay a higher merger premium in cross-border mergers relative to matching domestic mergers. Lel and Miller (2015) document that after a country passes a takeover law, poorly performing firms experience a higher probability of being taken over.…”

Section: Relation With Other Studies In Cross-border Acquisitions Andmentioning

confidence: 99%

Corporate pension plans and investment choices: Bargaining or conforming?

Duygun

Huang

Qian

et al. 2018

Journal of Corporate Finance

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Asian Development Bank InstituteThe Working Paper series is a continuation of the formerly named Discussion Paper series; the numbering of the papers continued without interruption or change. ADBI's working papers reflect initial ideas on a topic and are posted online for discussion. ADBI encourages readers to post their comments on the main page for each working paper (given in the citation below). Some working papers may develop into other forms of publication. The views expressed in this paper are the views of the author and do not necessarily reflect the views or policies of ADBI, ADB, its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.Working papers are subject to formal revision and correction before they are finalized and considered published.Asian Development Bank Institute Kasumigaseki Building, 8th Floor 3-2-5 Kasumigaseki, Chiyoda-ku Tokyo 100-6008, JapanTel: +81-3-3593-5500 Fax:+81-3-3593-5571 URL:www.adbi.org E-mail: info@adbi.org AbstractThis paper investigates the impacts of defined-benefit (DB) pension plans on the corporate investment choices between diversifying and non-diversifying investments. We find a firm's DB plan coverage is negatively associated with its propensity of making a major investment. Subject to a major investment decision, however, the firm with higher DB plan coverage is more likely to diversify, i.e., acquire firms abroad or in other industries, rather than invest in fixed assets or make non-diversifying (i.e., domestic horizontal) acquisitions. Moreover, in diversifying acquisitions, they are more likely to invest in countries or industries with a strongly unionized workforce. Further analysis on post-investment performance shows that firms with higher DB plan coverage experience a greater improvement in operating profitability after a diversifying acquisition, and the improvement mainly comes from a higher asset turnover rather than cost reduction. On the other hand, DB plan sponsoring firms experience a decline in profitability after a large capital expenditure or a non-diversifying acquisition. We propose that both the bargaining motive and the conforming motive can explain these results.

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Carbon emissions, corporate governance, and hostile takeover threats

Tanthanongsakkun¹,

Kyaw²,

Treepongkaruna

et al. 2022

Bus Strat Env

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Exploiting a unique measure of takeover vulnerability principally based on state legislations, we investigate how corporate carbon reduction efforts are influenced by the takeover market, which is widely regarded as a crucial instrument of external corporate governance. Our results show that more takeover exposure brings about significantly greater efforts to reduce carbon emissions. A rise in takeover susceptibility by one standard deviation improves carbon reduction performance by 12.81%. The findings corroborate the notion that the takeover market, acting as an external governance mechanism, compels managers to adopt policies that benefit shareholders in the long run. Our results imply that carbon emissions are a crucial corporate outcome as it is subject to the pressure from the takeover market. Companies should pay a close attention to this matter. Further analysis robustly validates the results, including propensity score matching, entropy balancing, an instrumental variable analysis, and heteroscedastic identification. Our measure of takeover vulnerability is plausibly exogenous and thus probably reveals a causal effect, rather than a mere association.

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Does Takeover Activity Cause Managerial Discipline? Evidence from International M&A Laws

Cited by 173 publications

References 64 publications

International Mergers and Acquisitions Laws, the Market for Corporate Control, and Accounting Conservatism

International Mergers and Acquisitions Laws, the Market for Corporate Control, and Accounting Conservatism

Corporate pension plans and investment choices: Bargaining or conforming?

Carbon emissions, corporate governance, and hostile takeover threats

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