Abstract

http://ssrn.com/abstract=1730316
 
 

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Does Takeover Activity Cause Managerial Discipline? Evidence From International M&A Laws


Ugur Lel


Virginia Polytechnic Institute & State University - Department of Finance, Insurance, and Business Law

Darius P. Miller


Southern Methodist University (SMU) - Edwin L. Cox School of Business

July 22, 2013


Abstract:     
This paper examines the impact of the market for corporate control on managerial discipline around the world. Exploiting an exogenous source of variation in the threat of takeover arising from the staggered initiation of takeover laws across countries, we show that the propensity to replace poorly performing CEOs increases following the enactment of M&A laws. Taking advantage of differences in legal protection as a second source of variation, we find that this increased sensitivity of CEO turnover to performance depends on availability of internal governance mechanisms as substitutes. Finally, we show that following the passage of takeover laws, poorly performing firms experience more frequent takeovers and increases in foreign institutional ownership, suggesting these are two of the mechanisms behind the improvement in corporate governance.

Number of Pages in PDF File: 65

Keywords: threat of takeover, managerial discipline, mergers and acquisitions laws, corporate control

JEL Classification: G34, G38, K22

working papers series


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Date posted: December 24, 2010 ; Last revised: July 22, 2013

Suggested Citation

Lel, Ugur and Miller, Darius P., Does Takeover Activity Cause Managerial Discipline? Evidence From International M&A Laws (July 22, 2013). Available at SSRN: http://ssrn.com/abstract=1730316 or http://dx.doi.org/10.2139/ssrn.1730316

Contact Information

Ugur Lel (Contact Author)
Virginia Polytechnic Institute & State University - Department of Finance, Insurance, and Business Law ( email )
1016 Pamplin Hall (0221)
Blacksburg, VA 24060-0221
United States
Darius P. Miller
Southern Methodist University (SMU) - Edwin L. Cox School of Business ( email )
P.O. Box 750333
Dallas, TX 75275-0333
United States
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