Macro corporate governance and the price sensitivity of rivals at acquisition announcements

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Copyright: Wang, Zhengyuan
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Abstract
This thesis investigates the role of macro corporate governance in determining the price sensitivity of rivals at acquisition announcements by employing a large sample of 8006 mergers and acquisitions (M&As) and related rival firms across 46 countries spanning January 1990 to December 2009. The empirical results show that macro corporate governance and legal environments have significant impacts on abnormal returns to rivals at acquisition announcements. More specifically, a stable political situation, efficient regulation enforcement, strict corruption control, the absence of daily share price limits, good shareholder protection as well as high financial information transparency increase the abnormal returns to rivals, whereas strong creditor rights reduces the price sensitivity of rivals. Moreover, the results remain valid if we employ firm-level corporate governance, that is, rivals with better firm-level corporate governance ratings exhibit high price sensitivity at M&A announcements. Our results are not driven by the dominant sample country, and are valid even after controlling for deal types (horizontal/vertical/conglomerate/cross-border), firm-level characteristics (relative firm size, book-to-market ratio, dividend payout ratio, return on equity, price-earnings ratio, stock return volatility, earning management, debt-to-equity ratio, stock turnover, firm growth), industry concentration and stock market development.
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Author(s)
Wang, Zhengyuan
Supervisor(s)
Li, Donghui
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Publication Year
2011
Resource Type
Thesis
Degree Type
Masters Thesis
UNSW Faculty
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