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Board composition, ownership structure and hostile takeovers: some UK evidence

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  • Noel O'Sullivan
  • Pauline Wong

Abstract

This paper examines the relationship between internal and external control mechanisms in a sample of hostile takeover targets and a control group of non-target firms in the UK for the period 1989–93. The paper investigates whether there are significant differences in board composition, executive ownership and external shareholder control between the two groups. We find that hostile targets are more likely to have different individuals in the roles of chairman and CEO but employ non-executives with fewer additional directorships than non-targets. Executive share ownership is significantly lower in targets, suggesting that hostile bids are more likely to be pursued when target managers possess insufficient equity either to defeat the bid or make the bid too expensive for bidders. We find some evidence that institutional and unaffiliated blockholders in smaller targets help managers defeat unwanted bids.

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  • Noel O'Sullivan & Pauline Wong, 1999. "Board composition, ownership structure and hostile takeovers: some UK evidence," Accounting and Business Research, Taylor & Francis Journals, vol. 29(2), pages 139-155.
    • Handle: RePEc:taf:acctbr:v:29:y:1999:i:2:p:139-155
    DOI: 10.1080/00014788.1999.9729575
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    Cited by:

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    2. Noel O'Sullivan, 2000. "The Determinants of Non-Executive Representation on the Boards of Large UK Companies," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 4(4), pages 283-297, December.
    3. 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.
    4. Jehad S. Aldehayyat & Sliman S. Alsoboa & Mohammad H. Al-Kilani, 2017. "Investigating How Corporate Governance Affects Performance of Firm in Small Emerging Markets: An Empirical Analysis for Jordanian Manufacturing Firms," International Business Research, Canadian Center of Science and Education, vol. 10(1), pages 77-95, January.
    5. 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.
    6. Charlie Weir & David Laing, 2003. "Ownership structure, board composition and the market for corporate control in the UK: an empirical analysis," Applied Economics, Taylor & Francis Journals, vol. 35(16), pages 1747-1759.
    7. Caiazza, Stefano & Pozzolo, Alberto Franco, 2016. "The determinants of failed takeovers in the banking sector: Deal or country characteristics?," Journal of Banking & Finance, Elsevier, vol. 72(S), pages 92-103.
    8. Jianhong Zhang & Haico Ebbers, 2010. "Why Half of China’s Overseas Acquisitions Could Not Be Completed," Journal of Current Chinese Affairs - China aktuell, Institute of Asian Studies, GIGA German Institute of Global and Area Studies, Hamburg, vol. 39(2), pages 101-131.
    9. 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.
    10. Abubakr Saeed & Qasim Ali & Hammad Riaz & Muhammad Asif Khan, 2022. "Audit Committee Independence and Auditor Reporting for Financially Distressed Companies: Evidence From an Emerging Economy," SAGE Open, , vol. 12(2), pages 21582440221, April.
    11. Caiazza, Stefano & Pozzolo, Alberto Franco, 2014. "The determinants of abandoned M&As in the banking sector," Economics & Statistics Discussion Papers esdp14074, University of Molise, Department of Economics.

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