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Corporate governance transfers: the case of mergers and acquisitions

Author

Listed:
  • Tanveer Hussain

    (University of Essex, Southend Campus)

  • Abongeh A. Tunyi

    (University of Sheffield)

  • Jacob Agyemang

    (University of Essex)

Abstract

We study changes in corporate governance around mergers and acquisitions by comparing the ex-post corporate governance of the combined firm with the ex-ante weighted average governance of the bidder and target. We find that when the quality of the bidder governance is better than the target before the acquisition, the ex-post corporate governance quality of the combined firm is better than the ex-ante weighted average of each firm. We document post-acquisition improvement in the combined firm’s board independence, audit committee independence, stock compensation, and minority shareholders protection, proposing that these firm-level attributes serve as potential channels to explain better corporate governance quality of the combined firm. The operating performance of the combined firm also improves when the bidder’s pre-deal governance quality is better than the target. Our results support the portability theory of corporate governance, suggesting that poorly governed targets are better off if acquired by better-governed bidders.

Suggested Citation

  • Tanveer Hussain & Abongeh A. Tunyi & Jacob Agyemang, 2024. "Corporate governance transfers: the case of mergers and acquisitions," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 21(4), pages 543-567, December.
    • Handle: RePEc:pal:ijodag:v:21:y:2024:i:4:d:10.1057_s41310-023-00217-0
    DOI: 10.1057/s41310-023-00217-0
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    More about this item

    Keywords

    Firm corporate governance; Combined firm; Mergers and acquisitions; Portability theory; Operating performance;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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