The role of hostile takeovers in corporate governance

Rajeeva Sinha

Applied Financial Economics, 2004, vol. 14, issue 18, 1291-1305

Abstract: The study makes a distinction between the role of hostile takeovers as a mechanism for downsizing and exit in the process of 'creative destruction' and the role of hostile takeovers as a corporate governance mechanism for curbing managerial slack and opportunism. The likelihood that underperforming firms with ineffective internal governance structures are the targets of hostile takeover bids is examined using a panel data for a matched sample of firms in the UK. The study does not find underperformance in firms as a significant factor in the likelihood of a hostile takeover bid. The findings of the literature reporting a significant influence of underperformance in hostile takeovers appear to be the outcome of a mis-specified model. The study also compares the relationship between governance structure and performance for firms subject to a hostile takeover bid with firms that did not receive a tender offer. The empirical findings do not show that firms with relatively ineffective internal governance structure are the likely targets for hostile takeover bids.

Date: 2004
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/0960310042000280492 (text/html)
Access to full text is restricted to subscribers.

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:taf:apfiec:v:14:y:2004:i:18:p:1291-1305

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAFE20

DOI: 10.1080/0960310042000280492

Access Statistics for this article

Applied Financial Economics is currently edited by Anita Phillips

More articles in Applied Financial Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().