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Directors' Recommendations in Takeovers: An Agency and Governance Analysis

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  • Darren Henry

Abstract

This paper evaluates whether directors of target companies make response recommendations in takeovers which are consistent with the interests of shareholders, by examining the relationship between target director recommendations and associated takeover characteristics and ownership and corporate governance characteristics of target companies. The findings suggest that response recommendations appear to be more closely associated with the self-interest of directors rather than shareholders' concerns, and that common governance initiatives aimed at aligning the interests of shareholders and managers are ineffective in resolving this agency problem. The results suggest the need for legislative or judicial reforms in Australia to encourage takeover activity and reduce takeover hostility. Copyright Blackwell Publishers Ltd, 2005.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Business Finance & Accounting.

Volume (Year): 32 (2005-01)
Issue (Month): 1-2 ()
Pages: 129-159

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Handle: RePEc:bla:jbfnac:v:32:y:2005-01:i:1-2:p:129-159

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0306-686X

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Cited by:
  1. Shams, Syed M.M. & Gunasekarage, Abeyratna & Colombage, Sisira R.N., 2013. "Does the organisational form of the target influence market reaction to acquisition announcements? Australian evidence," Pacific-Basin Finance Journal, Elsevier, vol. 24(C), pages 89-108.
  2. Wang, Hongxia & Sakr, Sameh & Ning, Yixi & Davidson III, Wallace N., 2010. "Board composition after mergers, does it matter to target shareholders?," Journal of Empirical Finance, Elsevier, vol. 17(5), pages 837-851, December.
  3. Joshua Porter & Harminder Singh, 2010. "What Factors Drive Takeovers in Australia?," International Journal of Business and Economics, College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 9(2), pages 87-103, August.
  4. Zhang, Jianhong & Zhou, Chaohong & Ebbers, Haico, 2011. "Completion of Chinese overseas acquisitions: Institutional perspectives and evidence," International Business Review, Elsevier, vol. 20(2), pages 226-238, April.
  5. Bugeja, Martin, 2007. "Voluntary use of independent valuation advice by target firm boards in takeovers," Pacific-Basin Finance Journal, Elsevier, vol. 15(4), pages 368-387, September.
  6. Henry, Darren, 2004. "Corporate governance and ownership structure of target companies and the outcome of takeovers," Pacific-Basin Finance Journal, Elsevier, vol. 12(4), pages 419-444, September.

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