Operating performance changes associated with corporate mergers and the role of corporate governance

Abstract

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 AbstractWe find that corporate governance characteristics of acquiring firms (board ownership, board size, and block-holder control) have an economically and statistically significant impact on operating performance changes following mergers. We also show that dispersion of intra-board ownership stakes is an important but heretofore overlooked factor when judging the influence of ownership on the outcomes of corporate choices. Finally, we present evidence that suggests the market sometimes under-or overreacts to merger news when initially revaluing merger partners but corrects any miscalculation following the consummation of the merger.JEL classification: G34; L25

Impact of corporate governance score on abnormal returns and financial performance of mergers and acquisitions

“…Further, they provide a higher rate of return on capital employed, return on equity, and net profit margin. The findings reported here are consistent with Core et al (2006), Caylor (2009), Drobetz et al (2004), and Carline et al (2009).…”

“…The finding that board size has negative impact on performance of acquiring firm is consistent with the results reported in Carline et al (2009), Yermack (1996, Jensen (1993), Lipton and Lorsch (1992), and Swanstrom (2006). However, the finding that smaller boards are more effective goes against Grinstein and Haribar (2004).…”

“…Impact of corporate governance on acquirers' performance Carline et al (2009) examine associations between corporate governance characteristics of acquiring firms and operating performance effects of 81 domestic corporate mergers in the United Kingdom during 1985Kingdom during -1994. They find that board ownership, board size, and block-holder have an economically and statistically significant impact on post-merger operating performance changes.…”

Creating or destroying value through mergers and acquisitions: A marketing perspective

“…However, this sample size is quite consistent with a number of previous studies, such as 38 M&A deals (Clark & Ofek, 1994); 46 M&A deal (Ramaswamy, 1997); 50 M&A deals (Healy, et al, 1997); 36 M&A deals (Sharma & Ho, 2002), 83 M&A deals (Fraser & Zhang, 2009); 81 M&A deals (Carline, Linn & Yadav, 2009). …”

Does ownership matter in mergers? A comparative study of the causes and consequences of mergers by family and non-family firms

“…Previous studies on the effects of mergers on operating performance attempt to identify the sources of gains from mergers and determine whether one can ever realize the expected gains at the announcement of a merger. The results of previous studies on this issue are not consistent (Ikeda and Doi, 1983;Odagiri and Hase, 1989;Ravenscraft and Scherer, 1989;Healy et al, 1992;Carline et al, 2009). To the best of our knowledge, however, none of the existing studies directly examine the differences between family and non-family firms with regard to merger performance 9 .…”