When the Role Fits: How Firm Status Differentials Affect Corporate Takeovers

Strategic Management Journal, Forthcoming

49 Pages Posted: 12 Nov 2012 Last revised: 23 Aug 2014

See all articles by Rui Shen

Rui Shen

Chinese University of Hong Kong, Shenzhen; Nanyang Technological University (NTU) - Division of Accounting

Yi Tang

Hong Kong Polytechnic University

Guoli Chen

INSEAD - Singapore

Date Written: November 12, 2012

Abstract

This study explores the implications of inter-firm status differentials for firm behaviors in corporate takeover transactions. We argue that the more the status differential between two firms is aligned with expectations of their roles embedded in the specific economic activity, the easier it is for them to agree on the appropriate means to reach consensus on the given transaction. Using the empirical context of the U.S. corporate takeover market, we document strong support for our theoretical predictions: the greater the status differential between an acquirer and a target, the more positively the market reacts to both the acquirer and the target upon the announcement of the acquisition deal, the more likely it is for the deal to be completed, and the acquirer is also more likely to achieve better post-acquisition performance. We discuss the theoretical implications of our study for corporate takeover research, status theory, and inter-firm transaction and cooperation.

Keywords: status differential, corporate takeover, role conflict, behavioral expectation

Suggested Citation

Shen, Rui and Tang, Yi and Chen, Guoli, When the Role Fits: How Firm Status Differentials Affect Corporate Takeovers (November 12, 2012). Strategic Management Journal, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2174327 or http://dx.doi.org/10.2139/ssrn.2174327

Rui Shen

Chinese University of Hong Kong, Shenzhen ( email )

Nanyang Technological University (NTU) - Division of Accounting ( email )

Nanyang Business School
Singapore, 639798
Singapore

Yi Tang

Hong Kong Polytechnic University ( email )

11 Yuk Choi Rd
Hung Hom
Hong Kong

Guoli Chen (Contact Author)

INSEAD - Singapore ( email )

Singapore

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