Corporate Governance and M&As
Corporate governance and mergers and acquisitions (M&As) have been among the most fertile areas of finance research for more than 30 years. Multiple attempts have been made to summarize the two literatures at various stages of their development. For example, Jensen and Ruback (1983) and Andrade, Mitchell, and Stafford (2001) provide a synthesis of the M&A literature and Shleifer and Vishny (1997) present a review of the corporate governance literature. Rather than repeating much of the earlier work, this chapter surveys the research that falls at the intersection of these two broad literatures. Studies that fit this profile primarily address one or more of the following questions. First, do takeovers play a managerial disciplinary role, and does the threat of takeovers or the lack thereof affect the decision making by managers and the wealth of firm stakeholders? Second, when acquiring firms view M&As as major investments, what is the impact of various corporate governance mechanisms on the profitability of these transactions from the acquiring shareholders’ perspective? Third, how are target shareholder gains from takeovers related to the incentives of target management? Fourth, is there any connection between the combined returns of acquiring and target shareholders and the corporate governance at the acquirer and target? This chapter is organized according to ...