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Journal of Finance Vol. 62 No. 4 2007

Corporate Governance and Acquirer Returns

Ronald W. Masulis1,2,3,4,5,6; Cong Wang1,2,3,4,5,6; Fei Xie7,2,3,4

1 George Mason University · 2 Chinese University of Hong Kong · 3 Georgetown University · 4 Vanderbilt University · 5 Hong Kong University of Science and Technology · 6 American Finance Association · 7 Federal Emergency Management Agency

open access

Abstract

We examine whether corporate governance mechanisms, especially the market for corporate control, affect the profitability of firm acquisitions. We find that acquirers with more antitakeover provisions experience significantly lower announcement‐period abnormal stock returns. This supports the hypothesis that managers at firms protected by more antitakeover provisions are less subject to the disciplinary power of the market for corporate control and thus are more likely to indulge in empire‐building acquisitions that destroy shareholder value. We also find that acquirers operating in more competitive industries or separating the positions of CEO and chairman of the board experience higher abnormal announcement returns.

DOI
10.1111/j.1540-6261.2007.01259.x
Volume
62
Issue
4
Pages
1851-1889
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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