The market for corporate control and firm information environment: Evidence from five decades of data

Xiaoran Ni, Ye Wang and David Yin

Journal of Banking & Finance, 2025, vol. 171, issue C

Abstract: This paper reconciles conflicting empirical findings in the takeover and firm transparency literature by utilizing a comprehensive takeover index from Cain, McKeon, and Solomon (2017). Examining a broad sample of U.S. public firms from 1970 to 2020, we document a negative relation between takeover susceptibility and firm opacity, measured primarily through stock price crash risk, and also through accrual/real earnings management, financial statement readability, analyst forecast dispersion, and voluntary disclosure. Stronger takeover threats mitigate crash risk by curtailing managerial empire-building incentives, promoting timely information disclosure, and constraining manipulative accounting practices. Our research confirms the effectiveness of the market for corporate control in addressing information-related agency problems and enhancing firm transparency. These findings persist across a broad range of firms and an extended time period, addressing the limitations of earlier studies. By employing a more holistic measure of takeover vulnerability and examining multiple facets of transparency, we provide a nuanced understanding of how corporate governance mechanisms influence firm performance and risk.

Keywords: Market for corporate control; Crash risk; Information environment; Takeover Provision; Corporate Governance (search for similar items in EconPapers)
JEL-codes: G12 G14 G30 G38 K22 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426624002644
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:171:y:2025:i:c:s0378426624002644

DOI: 10.1016/j.jbankfin.2024.107350

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().