The source of difference in long-term post-takeover performance-Management turnover and restructuring activities
Date Issued
2007
Date
2007
Author(s)
Lee, Pei-Ying
DOI
en-US
Abstract
In this article we discuss the topic of disciplining target management after acquisitions and examine whether the move benefits acquirers in terms of long-term post-takeover performance. We document higher frequency of disciplinary turnover for tender offer than mergers after successful transfer of control. The frequency of undertaking a wide range of activities associated with target business is higher in tender offers as well. We find disciplinary sub-samples perform better than non-disciplinary sub-samples which experience a decline in profitability. Moreover, acquisitions are followed by improvement in operating performance if acquirers focus on contraction to restructure targets. The results in stock return for sub-samples are not as distinct as in operating performance, but abnormal returns for acquirers without disciplining target managers or downsizing target are significantly negative. Regression models don’t exhibit significantly positive effect of disciplinary turnover after controlling for other variables, but show positive effect of contraction measures. Therefore we suggest that higher rate of specific actions are probably the underlying force leading to better performance for tender offers rather than higher rate of disciplinary turnover following acquisitions.
Subjects
併購
重整
長期報酬
Merger
Restructuring
Management turnover
Long-term abnormal return
Type
thesis
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