Directors' Recommendations in Takeovers: An Agency and Governance Analysis

27 Pages Posted: 6 Feb 2005

See all articles by Darren Henry

Darren Henry

La Trobe University - Department of Economics and Finance; Financial Research Network (FIRN)

Abstract

This paper evaluates whether directors of target companies make response recommendations in takeovers which are consistent with the interests of shareholders, by examining the relationship between target director recommendations and associated takeover characteristics and ownership and corporate governance characteristics of target companies. The findings suggest that response recommendations appear to be more closely associated with the self-interest of directors rather than shareholders' concerns, and that common governance initiatives aimed at aligning the interests of shareholders and managers are ineffective in resolving this agency problem. The results suggest the need for legislative or judicial reforms in Australia to encourage takeover activity and reduce takeover hostility.

Suggested Citation

Henry, Darren, Directors' Recommendations in Takeovers: An Agency and Governance Analysis. Available at SSRN: https://ssrn.com/abstract=661986

Darren Henry (Contact Author)

La Trobe University - Department of Economics and Finance ( email )

Department of Economics and Finance
La Trobe Business School
Bundoora 3086 Victoria
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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