Change in Control and Firm Performance

Yin-Hua Yeh () and Pei-Gi Shu ()

Business and Economic Research, 2014, vol. 4, issue 2, 265-296

Abstract: Whether firms that experienced change in control perform better or worse than before the change remains a puzzling issue. In this study we investigate the firms that experienced change in control and find that poor performing firms tend to be the takeover targets; however, these firms performed even worse after change of control. We find that corporate governance dictates the post-change performance measures. The proportion of directors controlled by the controlling shareholder is negatively related to the post-change performance measures. In contrast, the proportion of directors controlled by the second controlling shareholder is positively related to the post-change performance measures. Furthermore, the performance measures of the targets improved when the controlling shareholder entitled high cash flow rights. Finally, the change-in-control firms are more likely to be trapped in financial distress when the controlling shareholders deeply involved in the board.

Keywords: Corporate Governance; Change in Control; Controlling Shareholder (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:mth:ber888:v:4:y:2014:i:2:p:265-296

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