Abstract

http://ssrn.com/abstract=2091619
 
 

References (26)



 
 

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The Corporate Governance Role of Information Quality and Corporate Takeovers


Jing Li


Carnegie Mellon University - David A. Tepper School of Business

Lin Nan


Purdue University

Ran Zhao


Carnegie Mellon University - David A. Tepper School of Business

June 25, 2012


Abstract:     
This paper examines the corporate governance role of firms' information quality and the takeover market in disciplining management. We consider a model where the takeover market plays a disciplinary role in replacing the inefficient incumbent manager to increase the firm value. Increasing the information quality improves the takeover efficiency, but more precise information also discourages the manager's incentive to make effort. We find that current shareholders prefer a higher information quality level than the one that maximizes the firm value, due to the overbidding premium that the current shareholders may obtain by increasing the information quality to induce a higher likelihood of receiving a high-price bidding for a low value firm. We also analyze the effect of antitakeover laws or provisions. We find that the information quality is higher after the adoption of antitakeover law or antitakeover provisions. Moreover, the adoption of antitakeover laws always increases the firm value, but increases the current shareholders' payoff only when the manager's private benefit is large and the value enhancement from takeover is small.

Number of Pages in PDF File: 42

Keywords: Corporate takeovers, Information quality, Antitakeover law, Takeover efficiency

JEL Classification: G34, G38, M41

working papers series


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Date posted: June 25, 2012 ; Last revised: July 18, 2012

Suggested Citation

Li, Jing and Nan, Lin and Zhao, Ran, The Corporate Governance Role of Information Quality and Corporate Takeovers (June 25, 2012). Available at SSRN: http://ssrn.com/abstract=2091619 or http://dx.doi.org/10.2139/ssrn.2091619

Contact Information

Jing Li (Contact Author)
Carnegie Mellon University - David A. Tepper School of Business ( email )
5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States
Lin Nan
Purdue University ( email )
1310 Krannert Building
West Lafayette, IN 47907-1310
United States
7654944438 (Phone)
Ran Zhao
Carnegie Mellon University - David A. Tepper School of Business ( email )
5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States
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