Strategic risk-taking and value creation: Evidence from the market for corporate control

Shantaram P. Hegde and Dev Mishra ()

International Review of Economics & Finance, 2017, vol. 48, issue C, 212-234

Abstract: In a large sample of U.S. M&As over 1990–2007 we find that the bidders’ poor governance leads to lower levels of internal and external risk-taking, but the risk propensity of target firms does not appear to be compromised by their governance structure. Further, value is created when risk-takers acquire risk-avoiding target firms, but it is destroyed when bidders with a conservative investment policy takeover risk-taking target firms. This value effect is particularly pronounced when bidders are relatively better governed. Thus, our study offers new direct evidence that strategic risk transfer is an important channel of value creation in M&As.

Keywords: G3; D2; Corporate governance; Market for corporate control; Acquisitions; Takeovers; Agency problems; Event study; Risk taking and abnormal returns (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1059056016303689
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:reveco:v:48:y:2017:i:c:p:212-234

DOI: 10.1016/j.iref.2016.12.010

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().