Divestitures, wealth effects and corporate governance

Owen, Sian; Shi, Lei; Yawson, Alfred

doi:10.1111/j.1467-629x.2009.00332.x

Cited by 41 publications

(24 citation statements)

References 51 publications

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“…Indeed, more recent empirical evidence generally supports the value-creating nature of divestitures. Netter et al (2011) and Owen, Shi, and Yawson (2010) show that the market does not on average react negatively to divestiture announcements: the short-run returns around divestitures by public US firms are positive and amount to 4.4% and 1.57%. Moreover, Netter et al (2011) further document that when accumulating the abnormal returns from all activities related to the transaction (acquiring a target firm, being a target, and divesting the target), the total shortrun return accrues to over 16%.…”

Section: Post-merger Restructuring and Divestituresmentioning

confidence: 99%

Failure and success in mergers and acquisitions

Renneboog

Vansteenkiste

2019

Journal of Corporate Finance

199

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This paper provides an overview of the academic literature on the market for corporate control, and focuses specifically on firms' performance around and after a takeover. Despite the aggregate M&A market amounting to several trillions USD on an annual basis, acquiring firms often underperform relative to non-acquiring firms, especially in public takeovers. Although hundreds of academic studies have investigated the deal-and firm-level factors associated with M&A announcement returns, short-run returns are often not sustained in the long run. Moreover, the wide variety of performance measures and heterogeneity in sample sizes complicates the drawing of accurate and unambiguous conclusions. In this light, our survey compiles the recent literature and aims to identify the areas of research for which short-run returns predict (or fail to predict) long-run performance. We find that post-takeover deal performance is affected by key determinants including serial acquisitions, CEO overconfidence, acquirer-target relatedness and complementarity, and shareholder intervention in the form of voting or activism.

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Section: Post-merger Restructuring and Divestituresmentioning

confidence: 99%

Failure and success in mergers and acquisitions

Renneboog

Vansteenkiste

2019

Journal of Corporate Finance

199

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“…Ahn & Walker, 2007; Hoskisson & Turk, 1990). Owen, Shi, and Yawson (2010) further demonstrate that given a fundamental need to divest, firms with effective governance are more likely to divest despite the natural reluctance of managers to pursue an activity that reduces the size and private benefits of controlling large firms. Under less effective governance structure, corporate executives may have control of the company without adequate supervisory restraint.…”

Section: Theoretical Backgroundmentioning

confidence: 99%

Corporate Governance and Restructuring Activities Following Completed Bids

Abor

Graham

Yawson

2010

Corporate Governance: An International Review

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Manuscript Type: EmpiricalResearch Question/Issue: We examine the extent to which effective corporate governance impacts three restructuring choices following completed acquisitions -significant adjustment to workforce; sale of subsidiaries; and further acquisitions. We also investigate the relative firm performance in the post-restructuring period for the three respective options examined.c org_833 61..76 Research Findings/Insights: Based on a sample of 649 US firms between the period 1991 and 2009, we find support for the assertion that corporate governance impacts layoffs and further acquisitions. We, however, find no evidence to support a measurable governance effect on divestiture likelihood. In examining the post-acquisition performance following restructuring, we find no significant difference in performance between acquirers that made further acquisitions and those that did not. There is evidence, however, suggesting that acquirers who laid off workers and those that divested assets performed significantly poorer relative to a comparable group of acquirers. Theoretical/Academic Implications: This study adds to the empirical literature on the relation between governance and restructuring choices. We provide evidence on the impact of governance on restructuring choices that has not been documented in the academic literature. An implication of this study is that performance in post-restructuring period would not necessarily be enhanced even when governance exerts positive influences on restructuring choice. Practitioner/Policy Implications: Our empirical results demonstrate the relative importance of corporate governance in organizational strategic choices. This study offers insights to stakeholders interested in enhancing governance structures to influence restructuring decisions following completed bids.

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“…For instance, Owen et al . () found that the probability for US firms to sell assets is nearly 10 percent higher for a one standard deviation decrease in the number of antitakeover restrictions (higher shareholder rights). Event studies also show that the market reaction to acquisitions is more positive for well‐governed acquirers, which suggests that they are more careful in their acquisition decisions and less prone to overpaying for the target (Masulis et al ., ).…”

Section: Propositionsmentioning

confidence: 99%

Institutional ownership, cross‐shareholdings and corporate cash reserves in Japan

Nguyên

Rahman

2018

Accounting & Finance

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Cross-country studies document a negative relation between corporate governance and cash holdings. In contrast, this relation is found to be positive in the United States. In this paper, we examine the case of Japanese firms. Using institutional ownership and cross-shareholdings as the main governance variables, we show that better governance is associated with higher cash balances as in the United States. The reason is that better-governed firms make better investment decisions. Their investments are not driven by excess liquidity and result in higher profitability and higher firm valuation. Overall, our findings indicate that management profligacy is a bigger concern to shareholders than management propensity to hoard cash because of risk aversion.

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Divestitures, wealth effects and corporate governance

Cited by 41 publications

References 51 publications

Failure and success in mergers and acquisitions

Failure and success in mergers and acquisitions

Corporate Governance and Restructuring Activities Following Completed Bids

Institutional ownership, cross‐shareholdings and corporate cash reserves in Japan

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