The role of hostile takeovers in corporate governance

摘要

The study makes a distinction between the role of hostile takeovers as a mechanism for downsizing and exit in the process of 'creative destruction' and the role of hostile takeovers as a corporate governance mechanism for curbing managerial slack and opportunism. The likelihood that underperforming firms with ineffective internal governance structures are the targets of hostile takeover bids is examined using a panel data for a matched sample of firms in the UK. The study does not find underperformance in firms as a significant factor in the likelihood of a hostile takeover bid. The findings of the literature reporting a significant influence of underperformance in hostile takeovers appear to be the outcome of a mis-specified model. The study also compares the relationship between governance structure and performance for firms subject to a hostile takeover bid with firms that did not receive a tender offer. The empirical findings do not show that firms with relatively ineffective internal governance structure are the likely targets for hostile takeover bids.