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Corporate Governance and Acquirer Returns

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  • RONALD W. MASULIS
  • CONG WANG
  • FEI XIE

Abstract

We examine whether corporate governance mechanisms, especially the market for corporate control, affect the profitability of firm acquisitions. We find that acquirers with more antitakeover provisions experience significantly lower announcement-period abnormal stock returns. This supports the hypothesis that managers at firms protected by more antitakeover provisions are less subject to the disciplinary power of the market for corporate control and thus are more likely to indulge in empire-building acquisitions that destroy shareholder value. We also find that acquirers operating in more competitive industries or separating the positions of CEO and chairman of the board experience higher abnormal announcement returns. Copyright 2007 by The American Finance Association.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1540-6261.2007.01259.x
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Bibliographic Info

Article provided by American Finance Association in its journal The Journal of Finance.

Volume (Year): 62 (2007)
Issue (Month): 4 (08)
Pages: 1851-1889

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Handle: RePEc:bla:jfinan:v:62:y:2007:i:4:p:1851-1889

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