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A structural event study for M&As: an application in corporate governance

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  • Tarcisio da Graça
  • Robert Masson

Abstract

We apply structural event study methodology in the context of corporate governance to account for the interaction of two merger and acquisition (M&A) effects: synergy (total value) and dominance (bargaining power). The interaction of these effects simultaneously determines the parties’ abnormal returns. We posit that M&A synergy effects correspond to changes in agency costs between target’s management and target’s shareholders, while the dominance effects correspond to the balance of power between acquirer and target during negotiations. Our structural estimates suggest that more stable or entrenched directors generate higher value during normal operations but are softer negotiators when their firm becomes an acquisition target.

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  • Tarcisio da Graça & Robert Masson, 2016. "A structural event study for M&As: an application in corporate governance," Applied Economics, Taylor & Francis Journals, vol. 48(45), pages 4350-4365, September.
    • Handle: RePEc:taf:applec:v:48:y:2016:i:45:p:4350-4365
    DOI: 10.1080/00036846.2016.1156237
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    References listed on IDEAS

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    Cited by:

    1. Dharen Kumar Pandey & Vineeta Kumari, 2020. "Effects of merger and acquisition announcements on stock returns: an empirical study of banks listed on NSE & NYSE," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 12(1), pages 49-62, June.

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