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

October 24, 2014

Review of Financial Studies, forthcoming

Abstract:     
This paper exploits the staggered initiation of takeover laws across countries to examine whether the threat of takeover enhances managerial discipline. We show that following the passage of takeover laws (1) poorly performing firms experience more frequent takeovers; (2) the propensity to replace poorly performing CEOs increases, especially in countries with weak investor protection; and (3) directors of targeted firms are more likely to lose board seats following corporate control events. Our findings suggest that the threat of takeover causes managerial discipline through the incentives that the market for corporate control provides to boards to monitor managers.

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

JEL Classification: G34, G38, K22

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Date posted: December 24, 2010  

Suggested Citation

Lel, Ugur and Miller, Darius P., Does Takeover Activity Cause Managerial Discipline? Evidence from International M&A Laws (October 24, 2014). Review of Financial Studies, forthcoming. 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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