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We examine the market valuation of targets with multiple large shareholders (MLS) and single large shareholder (SLS) structures, in an international sample of M&A announcement in 19 countries outside North America. We find that the presence and power of MLS in these firms are negatively associated with abnormal returns and first-bid-to-merger-completion returns, suggesting that MLS mitigate agency problems in the target, and hence their acquisition is perceived as “a loss of good governance.” The negative association between MLS targets and returns is stronger in widely held firms suggesting that MLS indeed curb expropriation of minority shareholders. By contrast, when the second largest shareholder in the MLS structure of the target is a family, we find positive cumulative abnormal returns at the merger announcement, suggesting exacerbated agency problems in these firms that should benefit from the “acquisition of good governance.” Our evidence is robust to a battery of tests and to addressing potential endogeneity.

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.

The resolution of conflicts between shareholders and managers, at minimal cost, is the goal of corporate governance. In 1999, an intriguing series of events occurred that dramatically reshaped the Canadian airline industry. This clinical study considers these events in relation to four corporate governance mechanisms. The results of this clinical study suggest that these four mechanisms may not be sufficient to control a management team that is committed to a course of action and to retaining their positions. In practice, corporate governance can be severely limited, even when the majority of board members are outside directors. In addition, institutional shareholders may not be the disciplining force that theory and logic suggests. Overall, the results imply that managerial entrenchment is a powerful motivating force that may be impossible to counter even for a large, poorly performing corporation that is subject to a very attractive takeover offer.

“Corporate governance” refers to the top management process that manages and mediates value creation for, and value transference among, various corporate claimants (including the society-at-large), in a context that simultaneously ensures accountability toward these claimants (Sundaram, Bradley, Schipani & Walsh, 2000, p. 112).

We survey top managers of Fortune 1000 companies to learn if industry practitioners agree with the findings of academic research on specific corporate governance issues. We focus on board composition and size, executive/director compensation and ownership, firm performance, and other issues. The results suggest that the views of responding managers appear at odds with other empirical evidence provided in the literature on the majority of the issues examined. In addition, respondents are often unable to offer an opinion about whether they agree or disagree with specific corporate governance issues.

We empirically investigate the hypothesis that the less transparent (more difficult to value) the target’s assets are the more likely it is that the acquiring firm can obtain higher short- and long-term returns. We analyze a sample of 1,538 friendly acquisitions partitioned in two separate dimensions: acquisitions of public versus private firms, and acquisitions of a firm’s assets versus acquisitions of a firm’s assets and its management. Using a sample of (nondiversifying) real estate transactions with a public REIT as the acquirer, we find that acquisitions of public firms have insignificant short-term abnormal returns. Acquisitions of private targets have positive and significant short-term abnormal returns. The acquirer’s abnormal returns are higher in both cases when the transactions involve acquisition of the target firm’s management. We find parallel results when analyzing the acquirer’s Q over the merger year and the three following years. Our conclusions are robust to the type of financing (cash, stock, or a combination) used in the acquisition.

The chapter investigates three channels through which private benefits are hypothesized to be extracted in dual class companies: excess executive compensation, excess capital expenditures and excess cash holdings.

With a propensity score matched sample of S&P 1500 dual class and single class companies with concentrated control, the chapter analyzes the relationship between the valuation discount of dual class companies and measures of excess executive compensation, excess capital expenditure and excess cash holdings.

Executives in dual class firms earn greater compensation relative to their counterparts in single class firms. This excess compensation is more pronounced when the executive is a family member. The value of dual class shares is discounted most when cash holdings and executive compensation of dual class are excessive. Excess compensation is highest for executives who are family members of dual class companies. The dual class discount is not related to excess capital expenditures.

The research shows that the discount in the value of dual class shares in relation to the value of closely controlled single class company shares is directly related to the channels through which controlling shareholder-managers can extract private benefits.

While Merger & Acquisition (M&A) activity has reached unprecedented levels over recent years, M&A failure rates remain high. Yet, there is growing evidence that private equity funds show high success rates. As little is known about the differences between different types of buyers, and only scant information exists on private equity funds’ operations, we inductively explore the reasons for their outperformance. In this qualitative study, we identify three characteristics (i.e., organizational set-up, private equity investors’ professional identities, and an integrative work approach), which we brought together into a theoretical framework that explains how private equity professionals can enable better M&A performance. Finally, our findings underline the effectiveness of specific incentivization approaches applied in private equity funds.

This chapter extends Panyagometh and Roberts (2008) by taking into account differences in costs of closure among countries and the effects of subordinated debt on moral hazard problems. Our results show that a mandatory subordinated debt policy (MSDP) can be used with contingent purchase and assumption policy to further reduce probability of future bank failure if the high level of uninsured debt can improve the effectiveness of monitoring. While a MSDP might be appropriate for some developed countries with effective informational and supervisory environments and developed financial markets, such as the U.S., extending a MSDP into developing countries is questionable.