Control transfer and old shareholder governance of the “seller”: who hinders the management retention?

Yan Wang, Rong Dai, Shufang Xu and Li Luo

Nankai Business Review International, 2022, vol. 13, issue 3, 341-369

Abstract: Purpose - This paper aims to analyze the inhibitory effect of non-controlling shareholders governance mechanism on the retention of self-interest management, which provides theoretical support and practical basis for standardizing the control transfer behavior of listed companies and improving the governance mechanism of non-controlling shareholders. Design/methodology/approach - Taking A-share listed companies with control transfer from 2000 to 2017 as sample, this paper investigates the strategy, path and retention consequence of the target company’s market selected top management who collude with the new controlling shareholder to avoid the risk of being taken over by control transfer. Findings - This research explores that negative earnings management behavior may reduce the real premium of control transfer after deducting the “shell value”. The lower the real premium of control transfer after deducting the “shell value”, the higher the probability of management retention after control transfer. This paper also reveals that the real premium of control transfer after deducting the “shell value” plays complete mediation role between the negative earnings management behavior of the management and their own retention. The mediation effect of “collusion and price reduction” in the control transfer will be inversely moderated by the governance mechanism of noncontrolling shareholders including the old shareholders of the seller. Originality/value - This paper not only constitutes a supplement to the existing literature but also provides empirical evidence for standardizing the control transfer behavior of listed companies, and making good use of the old shareholders of the seller to improve corporate governance and alleviate agency conflict after control transfer.

Keywords: Control transfer; Earnings management; Control premium; Management retention; Noncontrolling shareholders governance (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eme:nbripp:nbri-12-2021-0083

DOI: 10.1108/NBRI-12-2021-0083

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