Discipline or Disruption? Stakeholder Relationships and the Effect of Takeover Threat

Ling Cen (), Sudipto Dasgupta () and Rik Sen ()
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Ling Cen: Department of Management (UTSc) and Rotman School of Management, University of Toronto, Toronto, Ontario M5S 3E6, Canada
Sudipto Dasgupta: Lancaster University Management School, Lancaster LA1 4YX, United Kingdom; and Department of Finance, Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong
Rik Sen: Department of Finance, Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong

Management Science, 2016, vol. 62, issue 10, 2820-2841

Abstract: Although a sizable literature suggests that firms benefit from vulnerability to takeovers because it reduces agency problems, the threat of takeovers can also impose ex ante costs on firms by adversely affecting relationships with important stakeholders, such as major customers. We find that when firms have corporate customers as important stakeholders, an exogenous reduction in the threat of takeovers increases their ability to attract new customers and strengthens their relationships with existing customers, resulting in improvement in operating performance. The positive effect on operating performance is greater for suppliers that are likely to offer unique and durable products to their customers. Our results suggest a beneficial aspect of protection from takeovers when stakeholder relationships are important.Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2015.2252 . This paper was accepted by Wei Jiang, finance .

Keywords: takeovers; corporate governance; product market relationships; business combination laws (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (25)

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