Board Composition, Board Effectiveness, and the Observed Form of Takeover Bids

Bange, Mary M.; Mazzeo, M

doi:10.1093/rfs/hhh001

Cited by 101 publications

(86 citation statements)

References 56 publications

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“…Morck, Shleifer, and Vishny, 1990;Amihud and Lev, 1981;Villalonga, 2004aVillalonga, , 2004b. Hostile Takeovers and Tender Offers seem to significantly benefit the target companies (as in Comment and Schwert, 1995;Schwert, 2000;Bange and Mazzeo, 2004), rather than the acquirers (Matsusaka, 1993;and Hubbard and Palia, 1999). 10 In line with several other papers in the literature, we do not find any support for the theory that Competition among bidders results in higher premiums and target abnormal returns.…”

Section: Multivariate Analysissupporting

confidence: 65%

Corporate acquisitions and financial constraints

Khatami

Marchica

Mura

2015

International Review of Financial Analysis

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Using a large sample of US acquisitions made between 1985 and 2013, we study the effect of financial constraints on acquisition gains and acquisition likelihood. Our findings show that financial constraints of target companies significantly increase acquisition premiums and abnormal returns for both parties. Our results further show that the presence of financial constraints in the target is one of the most important determinants of a takeover bid. This supports the idea that acquisitions may improve the ability of financially constrained companies to access capital through a better reallocation of resources within segments of the same company (e.g., internal capital market) or through better access to external markets. This would eventually benefit bidders too, as new capital would be invested in valuable growth opportunities that otherwise would expire unexercised.JEL Classification: G32, G34

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Section: Multivariate Analysissupporting

confidence: 65%

Corporate acquisitions and financial constraints

Khatami

Marchica

Mura

2015

International Review of Financial Analysis

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“…In contrast to the positive findings of , Bange and Mazzeo (2004) 1160 reported that firms with a higher level of board independence did not enhance shareholder wealth in target firms during the tender offer period. More specifically, when target boards were occupied by a majority of independent directors 1161 , targets received a lower initial offer premium, compared to other targets with less than 50% of independent directors.…”

mentioning

confidence: 68%

“…(2) Targets with a majority of independent directors extracted both higher initial tender offer premiums and higher revised bid premiums than targets without independent boards. Bange & Mazzeo (2004) 436 proposed negotiated mergers and bypass offers (tender offers) that were listed on the NYSE and AMEX between 1979 and 1990 Whether a board composed of a majority of independent directors Initial offer premium Target with a majority of independent directors received a lower initial offer premium and had lower likelihood of the success of the initial offer. Proportion of independent directors on the board…”

Section: Abnormal Returnsmentioning

confidence: 99%

“…found that a majority of independent directors serving on the target board extracted higher tender offer premiums, while Bange and Mazzeo (2004) Another approach is to look at defensive tactics adopted by boards with a majority of independent directors compared to those of insider-dominated boards. The next section of the thesis analyzes studies regarding the impact of independent directors on takeover defenses in target firms in relation to shareholder interests.…”

mentioning

confidence: 99%

“…1165 Perhaps, the longer sample periods and investigating the additional effect of negotiated mergers explain why the results of Bange and Mazzeo (2004) contradict those of whether the connection between board independence and shareholder wealth varies with the three types of takeover defenses, namely poison pills, greenmail and golden parachutes.…”

mentioning

confidence: 99%

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Are Independent Directors Effective Corporate Monitors? An Analysis of the Empirical Evidence in the USA and Canada

Lai

2014

SSRN Journal

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This thesis explores whether independent directors in the USA and Canada are effective in holding management accountable by: (1) analyzing how the policy of relying on independent directors developed and operates; (2) introducing the main theoretical critiques of independent directors' monitoring effect; and (3) examining whether empirical studies in the field of management science and financial economics support the policy in both countries of relying on independent directors as corporate monitors.Empirical evidence shows that boards with a majority of independent directors, in some circumstances, were associated with better firm performance (in the post-SOX period) and fulfilled certain board tasks effectively in the United States. Canadian studies, however, have not shown a positive association with improved firm performance. Audit committees composed entirely of independent directors have been effective in ensuring the quality of financial reporting in the United States, but this effect has not been found in Canada. Compensation committees composed fully of independent directors neither constrained the level of executive compensation nor tied CEO pay to firm performance in either country. US firms with an audit committee member who had accounting expertise, rather than financial analysis or supervisory expertise, were associated with a higher quality of financial reporting, while Canadian firms with an audit committee member who has financial expertise, instead of financial literacy, were associated with a similar effect. Studies also showed that independent directors perform better in certain circumstances.Based on empirical evidence, US regulators should consider: (1) changing the current mandatory requirements for an independent board and a completely independent compensation committee to a comply-or-explain requirement; (2) narrowing the qualification of a financial expert to an individual who has accounting expertise; and (3) recruiting independent directors who have two or fewer outside directorships, hold more of the corporation's shares, have lower cost of acquiring corporate information, and have no social connections with the CEO. In Canada, weak evidence of the monitoring effectiveness of independent directors supports the existing comply-or-explain approach. Canadian regulators may only need to require or recommend that at least one audit committee member has financial expertise, instead of only financial literacy.ii

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The sustainable development trend in environmental, social, and governance issues and stakeholder engagement: Evidence from mergers and acquisitions in China

2023

Corp Soc Responsibility Env

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This study investigates how potential target firms' environmental, social, and governance (ESG) performance affects bid premiums during the merger and acquisition (M&A) process. Using a sample of 5658 M&A deals between 2009 to 2020, we provide new evidence that target firms' ESG rating is positively correlated to bid price, particularly when the target firm scores highly on their singular environmental and governance ratings, whereas the targets with high single social ratings alone are not correlated to bid price. Our results also implied that when the target has lower environmental and governance performance, M&A deals are less likely to face bid premiums. We additionally find that the target firms of non‐state‐owned enterprises (non‐SOEs) are more likely to have a higher bid price as opposed to state‐owned enterprises' (SOEs) target firms. Additionally, we find that targets' ESG rating is positively correlated to target shareholder value creation, as well as being positively correlated to short bid deal negotiation times. Overall, our findings are in line with target‐resistance theory, which states that high ESG performance targets can use their ESG advantages to increase their bid price, as well as increase stakeholder engagement and generation of post‐M&A synergy.

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Board Composition, Board Effectiveness, and the Observed Form of Takeover Bids

Cited by 101 publications

References 56 publications

Corporate acquisitions and financial constraints

Corporate acquisitions and financial constraints

Are Independent Directors Effective Corporate Monitors? An Analysis of the Empirical Evidence in the USA and Canada

The sustainable development trend in environmental, social, and governance issues and stakeholder engagement: Evidence from mergers and acquisitions in China

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