Is Corporate Governance Important for Regulated Firms’ Shareholders? Evidence from Japanese Mergers and Acquisitions

Posted: 10 Jan 2010 Last revised: 22 Aug 2010

See all articles by Daisuke Nogata

Daisuke Nogata

affiliation not provided to SSRN

Konari Uchida

Kyushu University

Naohisa Goto

The University of Kitakyushu

Date Written: January 9, 2010

Abstract

This paper compares the reaction of bidders’ stock prices to acquisition announcements by regulated non-financial firms, banks, and unregulated companies in Japan. Results suggest that regulated non-financial firms do not experience a significant stock price response at M&A announcements, although banks’ and unregulated firms’ M&A announcements are regarded favorably by the stock market. Furthermore, the effect of stock option usage and strict boards on the stock price response is weak for regulated non-financial bidders. The results provide additional evidence that regulation results in managerial decisions’ having less influence on shareholder wealth and thereby changes the firm’s optimal governance structure. In contrast, the results provide no clear evidence that, for bank bidders, there is a significantly stronger or weaker relationship between governance and the stock price response to an M&A announcement than that of unregulated firms or regulated non-financial firms. The result does not support the view that regulatory monitoring weakens the effect of ordinary governance mechanisms.

Keywords: Regulation, Utilities, Bank, Corporate governance, Mergers and acquisitions

JEL Classification: G34, G38, L90

Suggested Citation

Nogata, Daisuke and Uchida, Konari and Goto, Naohisa, Is Corporate Governance Important for Regulated Firms’ Shareholders? Evidence from Japanese Mergers and Acquisitions (January 9, 2010). Journal of Economics and Business, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1533734

Daisuke Nogata

affiliation not provided to SSRN ( email )

Konari Uchida (Contact Author)

Kyushu University ( email )

6-19-1, Hakozaki, Higashiku
Fukuoka, 812-8581
Japan
+81-92-642-2463 (Phone)

Naohisa Goto

The University of Kitakyushu ( email )

Kitakyusyu
Japan

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