Ownership, capital structure and operating loss of acquiring firms

Abstract

PurposeThe article aims to investigate the effects of ownership and capital structure on postacquisition operating performance.Design/methodology/approachThe article extends the ongoing literature from an operating loss perspective and provides empirical evidence on the probability of acquirers’ operating loss in relation to ownership and capital structure. The operating performance of publicly listed manufacturing firms in China was tracked up to five years since the completion of the mergers and acquisitions (M&A) during 2003–2014.FindingsThe empirical results show that, in a five-year postacquisition period, state-owned enterprises (SOEs) are more likely to experience operating loss than non-SOEs. The likelihood of the operating loss is negatively associated with ownership concentration, implying that concentrated ownership may serve as an effective corporate governance mechanism in the emerging economy and improve postacquisition performance. The rise in leverage increases the likelihood of postacquisition operating loss, indicating that the costs of debt may outweigh the benefits.Originality/valueThe findings contribute to the literature on ownership, debt governance and post-M&A performance from an emerging economy perspective.

Insider ownership and default risk: What does the data reveal about Japanese firms?

“…Insider ownership provides an intriguing ownership setting to test implications for various firm performance outcomes. Indeed, extant literature has examined the relationship between insider ownership and accounting performance (Bhagat & Bolton, 2019; Tsafack & Guo, 2021; Fan & Wang, 2022), stock return (Kaserer & Moldenhauer, 2007), investment decisions (Panousi & Papanikolaou, 2012), firms’ innovative capacity (Choi, Lee, & Williams, 2011), the cost and uses of corporate debt (Lugo, 2019) and corporate value (Bhabra, 2007). However, studies investigating the association between insider ownership and default risk remain scarce, thus providing the primary impetus for the present study.…”