Enhancing corporate governance quality through mergers and acquisitions
Hussain, T., Kryzanowski, L., Loureiro, G., & Sufyan, M. (2024). Enhancing corporate governance quality through mergers and acquisitions. Journal of International Financial Management and Accounting, Early View. https://doi.org/10.1111/jifm.12203
Date
2024Copyright
© 2024 the Authors
This study examines whether the pre-deal target-bidder firm governance gap affects the bidder's postdeal change in governance quality. We estimate cross-sectional regressions using mergers and acquisitions from 2004 to 2016. We find that the bidder's firm-level governance improves for acquisitions where the target's governance quality is better than that of the bidder preacquisition. We attribute the results to reverse portability, suggesting that the predeal governance gap creates space for governance transfer, and bidders can adopt better governance of targets after the acquisition. Board independence, audit committee independence, CEO-Chairman separation, stock compensation, and equal treatment of minority shareholders serve as potential channels to demonstrate the bidder's higher governance after the acquisition. Our findings also reveal that bidders with governance improvement are also associated with higher operating performance. We extend the portability theory of Ellis et al. (2017) and suggest that governance can also travel from targets to bidders through mergers and acquisitions.
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Publisher
Wiley-BlackwellISSN Search the Publication Forum
0954-1314Keywords
Publication in research information system
https://converis.jyu.fi/converis/portal/detail/Publication/206879878
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- Kauppakorkeakoulu [1376]
Additional information about funding
Social Sciences and Humanities ResearchCouncil of Canada,Grant/Award Number: #435‐2018‐048; Portuguese Foundation for Science andTechnology, Grant/Award Number:UIDB/03182/2020; Marcus Wallenbergand Finnish Economic EducationLicense
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