ANDREW R. KEAY, University of Leeds - School of Law
Email: a.r.keay@leeds.ac.uk

The dominant theory in Anglo-American jurisdictions as far as determining the objective of large public companies, has been, and still appears to be, the shareholder primacy theory. Nevertheless, it would seem that in the past 20 years the stakeholder theory has become increasingly popular in many Anglo-American jurisdictions. Some scholars point to the advent of enlightened shareholder value in corporate legislation in the UK as an indication that the UK might be moving to a more stakeholder approach to the management of companies. Other scholars have noted that financial innovation in the commercial world means that shareholder primacy is problematic, and still others point out that contracts drafted by creditors of the company frequently restrict the implementation of shareholder primacy. With this in mind, this paper seeks to deal with two questions. First, can shareholder primacy survive under various challenges? Second, should it survive in any event? The paper seeks to address those questions by analysing the arguments supporting shareholder primacy and assessing whether these arguments are strong enough and provide sufficient justification for the theory to withstand the present and future challenges to it. The analysis is undertaken not only from a legal perspective, but also from finance, economics, ethics and organisational behaviour perspectives.

BRIAN KELLEHER RICHTER, University of California, Los Angeles - Global Economics and Management (GEM) Area
Email: brichter@anderson.ucla.edu

What role does political influence play in access to finance? Does this role differ across markets? Using a comprehensive cross-country dataset, I characterize how and why domestic political connections affect firms’ propensities to cross-list securities abroad. Connected firms have better access to foreign capital markets; moreover, the effect of connections is magnified for firms located in countries with weak property rights. Hence, domestic political connections, at the firm-level, serve as a strategic substitute for strong national property rights protections. This paper extends the interdisciplinary literature on political influence, institutions, and finance, as its findings require us to update our understanding from existing single-country studies: (i) political connections matter not only in domestic financial markets, but also in foreign financial markets; and, (ii) the primary reason politically connected firms receive better access to finance is not government-ownership or coercion of domestic banks, but rather implicit firm-level property rights protections that reduce privileged firms’ risk premiums vis-à-vis unconnected peers.

BRIAN J. M. QUINN, BC Law School
Email: bjmquinn@bc.edu

This Article examines whether reverse termination fees are a symmetrical response to the seller’s judicially-mandated fiduciary put and whether such fees represent an efficient transactional term. A series of Delaware cases over the last decade limited the degree to which buyers could rely on deal protection measures in merger agreements to prevent a seller from accepting a superior second bid resulting in a judicially-created fiduciary put. The development generated some controversy as well as interest in whether buyers might, in response, negotiate for a symmetrical put of their own. Initial inquiries focused on the potential role of the material adverse change (“MAC�) clause in merger agreements as a source of symmetrical buyer optionality. This Article revisits the inquiry of buy-side optionality and asks, given the recent experience, first, whether reverse termination fees tied to buyer termination rights are a symmetrical response to a seller’s fiduciary put. And, second, whether such fees represent an efficient transactional term such that the party best able to bear the costs associated with a termination does so.

Using a sample of 644 acquisitions from 2003 through 2008, which includes 105 transactions in which strategic buyers negotiated a reverse termination fee, this Article provides an empirical account of the use of reverse termination fees by strategic buyers, including the first taxonomy of reverse termination fee triggers. I find, first, reverse termination fee triggers are not symmetrical responses to the judicially mandated seller's fiduciary termination rights. Second, that to the extent reverse termination rights mimic termination rights in size that they may be inefficient terms.

JAN JINDRA, Menlo College
Email: JJ@JANJINDRA.COM
THOMAS MOELLER, Texas Christian University - Neeley School of Business
Email: t.moeller@tcu.edu

We provide new insights into the determinants of acquirer announcement returns with a unique sample of targets that are acquired within three years of their IPOs. Existing studies of acquisitions of private and established public targets find positive relations between acquirer announcement returns and prior target valuation changes. In our sample of recently listed firms, the relation between acquirer announcement returns and targets’ returns since their IPOs is negative. Our results are inconsistent with behavioral biases based on prospect theory that the prior literature emphasizes. Instead, we find that prior target returns are related to targets’ bargaining power and, to a lesser degree, target valuation uncertainty. Overall, our study adds to the evidence that rational explanations are important for the relation of prior target valuation changes and acquirer announcement returns.