Corporate governance and abnormal returns from M&A: A structural analysis
AbstractA structural event study methodology accounts for the interaction of two M&A effects: synergy (total value) and dominance (bargaining power). This interaction jointly (simultaneously) determines the parties’ abnormal returns. We propose an instrumental variable approach. An application in corporate governance illustrates of our methodology. We posit that M&A synergy effects correspond to changes in agency costs between target's management and target's shareholders; and the dominance effect corresponds to balance of power between acquirer and target during negotiations. Structural estimates indicate 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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Bibliographic InfoPaper provided by Département des sciences administratives, UQO in its series RePAd Working Paper Series with number UQO-DSA-wp032013.
Length: 62 pages
Date of creation: 01 Jul 2013
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Board entrenchment; E-index; event study; structural analysis; mergers and Acquisitions.;
Find related papers by JEL classification:
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-09-06 (All new papers)
- NEP-BEC-2013-09-06 (Business Economics)
- NEP-COM-2013-09-06 (Industrial Competition)
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