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Exploiting a novel measure of hostile takeover exposure primarily based on the staggered adoption of state legislations, we explore a crucial, albeit largely overlooked, aspect of corporate social responsibility (CSR). In particular, we investigate CSR inequality, which is the inequality across different CSR categories. Higher inequality suggests a less balanced, more lopsided, CSR policy.

In addition to the standard regression analysis, we perform several robustness checks including propensity score matching, entropy balancing and an instrumental-variable analysis.

Our results show that more takeover exposure exacerbates CSR inequality. Specifically, a rise in takeover vulnerability by one standard deviation results in an increase in CSR inequality by 4.53–5.40%. The findings support the managerial myopia hypothesis, where myopic managers promote some CSR activities that are useful to them in the short run more than others, leading to higher CSR inequality.

Our study is the first to exploit a unique measure of takeover vulnerability to investigate the impact of takeover threats on CSR inequality, which is an important aspect of CSR that is largely overlooked in the literature. We aptly fill this void in the literature.

Corporate governance has attracted enormous attention both in the area of law and in the area of financial economics. In comparative corporate governance studies, many people have devoted their energy to find a best corporate governance model. I argue that a functional analysis does not support the view that there is a single best corporate governance model in the world. I further use the transplantation of an English style takeover law into China to show that the importation of foreign law is not always based on careful analysis whether the imported foreign law is the best in the world. Furthermore, I use the subsequent adjustment of the transplanted English takeover law in China to show that the imported foreign law is subject to local political and economic conditions. If there is no best corporate govern model and the transplantation of foreign law into other countries with different social and political background does not achieve similar objectives, the search for a best corporate governance model is misguided. Just as tort law or constitutional law regimes may have diversified models, so do corporate governance regimes in countries with different historical, social and political backgrounds.

A corporate takeover (with major stake in equity) gives the acquirer the right to appoint majority of directors in the target’s board to control its management and policy decisions. When such acquisition is unsolicited and unwelcome, it becomes a “hostile takeover.” In such cases, the acquirer is said to be a “raider” and the raider’s management team may act under the influence of “hubris” implying that they seek to acquire the target for their own personal motives ignoring pure economic gains for the owners of both the companies. The hostile bidder makes all possible efforts to justify the takeover by paying handsome premium over the target’s fairly valued share price. In a hostile takeover, the target management or target promoters resist and fight tooth and nail against the raider to convey to the world that the bidder’s acts are not in the best interest of all their stakeholders. Any unsolicited and hostile takeover offer is generally viewed as oppression, domination or coercion by the bidding company against the target and its management. In a hostile bid, the existing target management always believes that whatever they do is in best interest of everyone. They feel complacent and assume that their standards of corporate governance are of highest order. Therefore, they are unwilling to succumb to the aggression and hostility of another corporate entity for takeover. The “so-called” victimized target resorts to all means to gain sympathy from peers, press, common shareholders, employees and general public. In today’s regulated market for corporate control, an intelligent hostile bidder would probably not acquire a business unless it has good strategic or financial reasons to do so. Hence, “stewardship” on the part of bidder’s management is very important in case of any hostile takeover. This chapter derives motivation from a three-and-half-decade-old abortive hostile takeover bid in India by Caparo Group of the UK and also the recently completed hostile takeover in India of a famous mid-sized information technology company, Mindtree by Larsen & Toubro, a major conglomerate. This research aims at developing a distinctive model to demonstrate that unsolicited hostile takeover may not be a good mechanism for a successful business combination.

This paper aims to address the question: What is the distribution of value (in pounds) created in a sample of domestic takeovers in the United Kingdom from 2013 to 2020 among acquirer and target stockholders?

The author employs a traditional event study methodology to calculate the percentage excess returns of companies on the announcement date. These returns are then converted into pound-denominated excess returns using the companies' market capitalizations. This allows the author to estimate the synergies of the mergers and acquisitions (M&As) and how they are allocated between acquirers and targets. This innovative transformation from percentage to pound excess returns establishes a new ratio methodology for addressing the paper's objective.

This paper reveals that in UK takeovers, 40 percent of the synergies in pounds are allocated to the stockholders of acquiring companies, while 60 percent go to the stockholders of target companies. In other words, acquirers retain a significant portion—more than half—of the synergies generated in these domestic deals. This original finding is statistically significant at the one percent level and strongly contradicts the hypothesis that acquirers, at best, merely break even.

The evidence that UK takeovers distribute value gains nearly equally between domestic deal parties challenges the enduring conventional insight in the M&A literature. This conventional wisdom suggests that the value created by business combinations is entirely distributed to target company stockholders. Consequently, this reexamination may have broader implications, offering an alternative perspective on the motives behind business combinations. This perspective differs from the “managerial hubris hypothesis,” which aligns with the prevailing conventional insight but receives limited support in the original finding reported here.

The rules on takeover bids are generally considered to be an important factor within the debate on corporate governance. The risk of a takeover bid – and of a consequent change in company control – should motivate a company’s board to act in the best interests of the shareholders (the so-called disciplinary mechanism). The European rules on takeover bids are enshrined in Directive 2004/25/EC (which is also known as the Thirteenth Directive on Company Law), which applies to bids for securities of companies (issuers) governed by the laws of Member States. In this chapter the author analysed the European rules on takeover bids and highlighted certain national options for implementing the Directive, although a revision of the European Directive, which will be based, among other things, on an examination of the advantages and disadvantages of its application, has been under way since 2004. The chapter also considered the revisions currently being proposed by the European Commission and the European Parliament.

Exploiting a unique measure of hostile takeover exposure principally based on the staggered adoption of state legislations, the authors investigate how external audit quality is influenced by the discipline of the takeover market. External auditors and the takeover market both function as important instruments of external corporate governance.

The authors execute a standard regression analysis and run a variety of robustness checks to minimize endogeneity, namely, propensity score matching (PSM), entropy balancing, an instrumental-variable analysis, Generalized method of moment (GMM) dynamic panel data analysis and Lewbel's (2012) heteroscedastic identification.

The authors’ immense sample spans half a century, encompassing nearly 180,000 observations and 17 takeover-related state legislations, one of the largest samples in the literature in this area. The authors’ results suggest that firms with more takeover exposure are significantly less likely to use Big N auditors. Therefore, a more active takeover market results in poorer external audit quality, corroborating the substitution hypothesis. The discipline of the takeover market substitutes for the necessity for a high-quality external auditor. Specifically, a rise in takeover susceptibility by one standard deviation lowers the probability of using a Big N auditor by 4.29%.

The authors’ study is the first to examine the effect of the takeover over market on audit quality using a novel measure of hostile takeover susceptibility mainly based on the staggered implementation of state legislation. Because the enactment of state legislation is beyond the control of any firm individually, it is plausibly exogenous. The authors’ results therefore probably reflect a causal influence rather than merely a correlation.

Exploiting an innovative measure of corporate culture based on machine learning and earnings conference calls, this study aims to investigate how corporate culture is influenced by hostile takeover threats. To sidestep endogeneity, this study uses a unique measure of takeover vulnerability principally based on the staggered implementation of state legislations, which are plausibly exogenous.

In addition to the standard regression analysis, this study also executes a variety of other empirical tests such as propensity score matching, entropy balancing and an instrumental variable analysis, to demonstrate that the results are robust. The final sample includes 27,663 firm-year observations from 4,092 distinct companies from 2001 to 2014.

This study documents that more takeover exposure weakens corporate culture considerably, consistent with the managerial myopia hypothesis. Threatened by the takeover risk, managers tend to behave myopically and are less likely to make long-term investments that promote strong corporate culture in the long run. Additional analysis focusing on a culture of innovation, which is especially vulnerable to managerial myopia, produces similar evidence.

To the best of the authors’ knowledge, this study is the first to explore the effect of takeover susceptibility on corporate culture using a distinctive metric of corporate culture based on textual analysis.

Capitalizing on a unique measure of takeover susceptibility principally based on the staggered implementation of state laws, this study aims to explore the takeover market’s effect on managerial ownership. The market for corporate control, often known as the takeover market, is an important external governance mechanism, whereas managerial ownership is a vital internal governance instrument. Managerial ownership brings into convergence the interests of shareholders and managers. The originality of this study arises from the usage of state-level anti-takeover legislations as a measure which is beyond the control of firms and plausibly exogenous to firm-specific characteristics.

In addition to the standard regression analysis, this study also executes a variety of robustness checks to minimize endogeneity, i.e. propensity score matching, entropy balancing, instrumental–variable analysis, Lewbel’s (2012) heteroscedastic identification and Oster’s (2019) testing for coefficient stability.

Based on a large sample of US firms, the results show that more hostile takeover threats bring about significantly lower managerial ownership. The results reinforce the prediction of the substitution hypothesis. The disciplinary function of the takeover market reduces agency conflict to the point where managerial ownership is less necessary as a governance mechanism. Specifically, a rise in takeover susceptibility by one standard deviation diminishes managerial ownership by 7.22%.

`To the best of the authors’ knowledge, this study is the first to shed light on the impact of the takeover market on managerial ownership using a novel measure mainly based on the staggered adoption of state laws, which are plausibly exogenous to individual firms’ characteristics. Consequently, unlike prior research, this study is more likely to indicate a causal effect, rather than merely a correlation.

Exploiting two novel measures of takeover vulnerability and asset redeployability, this paper aims to investigate the effect of the takeover market on redeployable assets. Redeployable assets are those with alternative uses. Asset redeployability is a crucial concept in the literature on investment irreversibility.

In addition to the standard regression analysis, the authors execute several robustness checks: propensity score matching, entropy balancing, instrumental-variable analysis and generalized method of moment dynamic panel data analysis.

The authors’ results reveal that more takeover threats reduce asset redeployability significantly, corroborating the managerial myopia hypothesis. Hostile takeover threats reduce managers’ job security and thus induce them to myopically focus on the current utilization of assets in the short run, rather than how they may be deployed in the long run, resulting in less asset redeployability.

To the best of the authors’ knowledge, this study is the first to investigate the effect of takeover threats on asset redeployability. Because the authors’ measure of takeover vulnerability is principally based on the staggered passage of state legislations, which are plausibly exogenous, the authors’ results likely reflect causality, rather than merely an association.

Agency theory suggests that if managers are not monitored, takeover negotiations may be contaminated by agency conflicts, which may weaken a firm's bargaining position. This paper argues that some blockholders are more effective monitors than others, and tests whether the negotiating power of a target or bidder is influenced by their respective blockholder composition. The paper aims to discuss these issues.

This paper classifies target and bidder outside blockholders as either aggressive monitors or moderate monitors, and tests whether the degrees of monitoring effectiveness influence a firm's share of the total wealth created by the takeover (a proxy for bargaining power).

This paper finds that firms that have the types of outside blockholders with a greater tendency to monitor managers elicit higher takeover gains. This suggests that negotiating power in takeovers is conditioned on the types of blockholders that monitor the target and bidder. The results support the premise that better monitoring leads to higher gains for shareholders in a takeover. In particular, the findings suggest that the greater the tendency of outside blockholders to monitor managers, the lower the level of takeover-related agency conflicts and the stronger a firm's relative bargaining power.

These findings imply that agency conflicts on either side of a takeover bid may be reduced by better monitoring, but especially among bidders.