Corporate governance, performance and take-overs: an empirical analysis of UK mergers.

Weir, Charlie

Abstract

This paper analyses the relationship between the probability of being acquired, firm performance and governance structures. The acquired firms were all fully quoted on the London Stock Exchange and the acquisitions took place between 1990 and 1993. They were matched by a sample of non-acquired quoted companies. The sample was also analysed in terms of hostile and non-hostile acquisitions. It was found that the key governance characteristics which differentiated between acquired and non-acquired corporations related to the proportion of non-executive directors on the board and to whether or not the roles of chief executive officer and chairman were combined. It was also found that acquired firms were poor performers, which suggests that the internal governance structures had been ineffective. These results applied to hostile and non-hostile targets. The findings support the view that hostile acquisitions are disciplinary but cast doubt on the claim that non-hostile acquisitions are purely synergistic. The results also support the view that certain governance characteristics are effective substitutes for the take-over mechanism as a means of minimizing discretionary behaviour.

Citation

WEIR, C. 1997. Corporate governance, performance and take-overs: an empirical analysis of UK mergers. Applied economics [online], 29(11), pages 1465-1475. Available from: https://doi.org/10.1080/000368497326291

• Journal Article Type: Article
• Acceptance Date: Nov 1, 1997
• Online Publication Date: Nov 1, 1997
• Publication Date: Nov 1, 1997
• Deposit Date: Oct 14, 2016
• Publicly Available Date: Oct 14, 2016
• Journal: Applied economics
• Print ISSN: 0003-6846
• Electronic ISSN: 1466-4283
• Publisher: Routledge
• Peer Reviewed: Peer Reviewed
• Volume: 29
• Issue: 11
• Pages: 1465-1475
• DOI: https://doi.org/10.1080/000368497326291
• Keywords: Corporate governance; Performance and takeovers; An empirical analysis of UK mergers
• Public URL: http://hdl.handle.net/10059/1896
• Contract Date: Oct 14, 2016