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An Empirical analysis of cancelled mergers, board composition and ownership structure

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  • Wallace Davidson
  • Stuart Rosenstein
  • Sridhar Sundaram

Abstract

This paper examines the effects of board composition and ownership structure in the valuation of target firms in cancelled mergers. These results find no significant association between board composition and shareholder wealth. On the contrary, when a merger is cancelled by the target firm, abnormal returns surrounding the announcement are negatively related to share ownership by inside directors. In addition, we find the likelihood that the target firm is subsequently taken over depends largely on two factors: stock ownership by inside directors and the presence of multiple bids. These results suggest a strong association between ownership structure and the valuation of target firms in cancelled mergers.

Suggested Citation

  • Wallace Davidson & Stuart Rosenstein & Sridhar Sundaram, 2002. "An Empirical analysis of cancelled mergers, board composition and ownership structure," Applied Financial Economics, Taylor & Francis Journals, vol. 12(7), pages 485-491.
    • Handle: RePEc:taf:apfiec:v:12:y:2002:i:7:p:485-491
    DOI: 10.1080/09603100010005302
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    Cited by:

    1. Nadia Hanif & Abida Hafeez & Noman Arshed, 2022. "Formal Institutional Distance and cross-border M&A-Contract Ineffectiveness: Moderating Role of Advisory Organizations," iRASD Journal of Management, International Research Alliance for Sustainable Development (iRASD), vol. 4(1), pages 1-16, March.
    2. Gene C. Lai & Keith M. Moore & Henry R. Oppenheimer, 2006. "Shall One Invest in Cancelled Targets after the Termination of Mergers and Acquisitions?," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 5(2), pages 93-110, August.
    3. Abhirup Chakrabarti & Will Mitchell, 2016. "The role of geographic distance in completing related acquisitions: Evidence from U.S. chemical manufacturers," Strategic Management Journal, Wiley Blackwell, vol. 37(4), pages 673-694, April.
    4. Hyejun Kim & Jaeyong Song, 2017. "Filling institutional voids in emerging economies: The impact of capital market development and business groups on M&A deal abandonment," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 48(3), pages 308-323, April.
    5. Lewis, Yimai & Bozos, Konstantinos, 2019. "Mitigating post-acquisition risk: the interplay of cross-border uncertainties," Journal of World Business, Elsevier, vol. 54(5), pages 1-1.

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