Whose Control Matters? Evidence from the Target Firms of Acquisitions

31 Pages Posted: 8 Jun 2003

See all articles by Yin-Hua Yeh

Yin-Hua Yeh

Fu-Jen Catholic University - Department of International Trade and Finance

Pei-Gi Shu

Fu-Jen Catholic University - Department of Business Administration

Shean-Bii Chiu

Department of Finance, National Taiwan University

Abstract

We find that corporate governance affects the post-acquisition performance of the target firms. Though poor-performing firms tended to be the acquired targets, we find that the performance of these target firms did not improve after acquisition. Some empirical variables of corporate governance dictate the post-acquisition performance of the target firm: the higher the proportion of directors or supervisors controlled by the controlling shareholder, the lower the post-acquisition performance of the target firm was. In contrast, the proportion of directors or supervisors controlled by the second largest shareholder was positively related to the postacquisition performance. Furthermore, the performance of the targets improved when the controlling shareholder invested a larger amount in the acquisition. Finally, the target firm was more likely to be trapped in financial distress when the controlling shareholder deeply involved in the board.

Keywords: Corporate Governance, Acquisition, Controlling shareholder

Suggested Citation

Yeh, Yin Hua and Shu, Pei-Gi and Chiu, Shean-Bii, Whose Control Matters? Evidence from the Target Firms of Acquisitions. Available at SSRN: https://ssrn.com/abstract=392601 or http://dx.doi.org/10.2139/ssrn.392601

Yin Hua Yeh (Contact Author)

Fu-Jen Catholic University - Department of International Trade and Finance ( email )

510, Zhongzheng Rd.
Xinzhuang Dist.
New Taipei County, 24205
Taiwan
+886-2-2903-1111 (Phone)
+886-2-2901-9779 (Fax)

Pei-Gi Shu

Fu-Jen Catholic University - Department of Business Administration ( email )

510, Zhongzheng Rd.
Xinzhuang Dist.
New Taipei County, 24205
Taiwan

Shean-Bii Chiu

Department of Finance, National Taiwan University ( email )

1 Sec. 4, Roosevelt Road
Taipei 106, 106
Taiwan

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