Hostile Takeovers in the UK and the Correction of Managerial Failure

London Business School Institute of Finance and Accounting Working Paper 156-1995

Posted: 26 Aug 1998

See all articles by Julian R. Franks

Julian R. Franks

London Business School - Institute of Finance and Accounting; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Colin Mayer

University of Oxford - Said Business School; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Abstract

The paper examines the disciplining function of hostile takeovers. It reports evidence of high board turnover and significant levels of restructuring post takeover. Large gains are anticipated in hostile bids as reflected in high bid premia. However, there is little evidence of poor performance prior to bids suggesting that the high board turnover does not derive from past managerial failure. Hostile takeovers do not therefore perform a disciplining function. Instead, rejection of bids appears to derive from opposition to redeployment of assets post takeover and renegotiation over the terms of bids.

JEL Classification: G34

Suggested Citation

Franks, Julian R. and Mayer, Colin, Hostile Takeovers in the UK and the Correction of Managerial Failure. London Business School Institute of Finance and Accounting Working Paper 156-1995, Available at SSRN: https://ssrn.com/abstract=6487

Julian R. Franks (Contact Author)

London Business School - Institute of Finance and Accounting ( email )

Institute of Finance and Accounting
Sussex Place - Regent's Park
London NW1 4SA
United Kingdom
+44 20 7262 5050 x3449 (Phone)
+44 20 7724 3317 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: https://ecgi.global/

Colin Mayer

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain
+44 1865 288112 (Phone)
+44 1865 288805 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

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