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Directors' Recommendations in Response to Takeover Bids: Do They Act in Their Own Interests?

Author

Listed:
  • Peter H. Eddey

    (Macquarie University.)

  • Roger S. Casey

    (Whitlam Turnbull and Co. Ltd., Sydney.)

Abstract

The extent to which directors of target companies act in their own interests, and not shareholder interests, when a takeover bid is received is examined using data from 400 takeover bids for Australian listed companies. A series of hypotheses is developed from theoretical inquiry into the motives of target company directors. Using univariate and multivariate analysis to test these hypotheses, it is found that directors' accept/reject recommendations to shareholders are associated with target leverage, bid premium, bidder's initial shareholding, ownership concentration (univariate only) and directors' shareholding in the target (univariate only). It is concluded that, overall, directors have acted in a manner consistent with shareholder interests, even though personal wealth effects are greatest for directors of bid-accept targets.

Suggested Citation

  • Peter H. Eddey & Roger S. Casey, 1989. "Directors' Recommendations in Response to Takeover Bids: Do They Act in Their Own Interests?," Australian Journal of Management, Australian School of Business, vol. 14(1), pages 1-28, June.
    • Handle: RePEc:sae:ausman:v:14:y:1989:i:1:p:1-28
    DOI: 10.1177/031289628901400101
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    References listed on IDEAS

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    Cited by:

    1. Etienne Redor, 2016. "Board attributes and shareholder wealth in mergers and acquisitions: a survey of the literature," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 20(4), pages 789-821, December.
    2. , 2009. "The Impact of Director Reputation and Performance on the Turnover and Board Seats of Target Firm Directors," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 36(1-2), pages 185-209.
    3. 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.
    4. Darren Henry, 2005. "Directors’ Recommendations in Takeovers: An Agency and Governance Analysis," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 32(1‐2), pages 129-159, January.

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