Hostile Takeovers and the Correction of Managerial Failure

Mayer, Colin and Franks, Julian (1996) Hostile Takeovers and the Correction of Managerial Failure. Journal of Financial Economics, 40 (1). pp. 163-181.

Abstract

This paper examines the disciplining function of hostile takeovers in the U.K. in 1985 and 1986. We report evidence of high board turnover and significant levels of post-takeover restructuring. Large gains are anticipated in hostile bids as reflected in high bid premiums. 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 post-takeover redeployment of assets and renegotiation over the terms of bids.

Item Type: Article
Keywords: Hostile takeovers; Executive dismissals
Subject(s): Finance
Centre: Faculty of Finance
Date Deposited: 11 Feb 2012 19:46
Last Modified: 23 Oct 2015 14:06
URI: http://eureka.sbs.ox.ac.uk/id/eprint/2177

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