Governance mandates, outside directors, and acquirer performance.

We use hand-collected board data around the issuance of two distinct government-led board structure mandates in the U.K. to establish the effect of outside directors on acquirer performance. Increases in outside director representation are associated with better acquirer returns in deals involving listed targets, but not when the target is private. These results are consistent with greater outside director reputational exposure when publicity is high. While we do not advocate mandated board structures, our evidence suggests that the particular diktats we examine were associated with improved acquirer performance in public firm takeovers. We present corroborating evidence from the U.S. around a similar reform period

The Cadbury code reforms and corporate performance.

This paper investigates the impact of adopting the Cadbury Committee's Code of Best Practices on the corporate performance of UK firms. The findings show improved corporate performance by companies which adopted the Code. Regarding the specific recommendations of the Code, splitting the positions of the Chairman of the Board and CEO does not result in improved corporate performance. The establishment of an internal audit and/or remuneration committee is positively associated with corporate performance, while the presence of a key executive director in such committees is negatively associated with corporate performance. There is a negative relation between corporate performance and the proportion of non-executive directors, but a positive relation between corporate performance and the square of the proportion of non-executive directors

Corporate Takeover Bids, Methods of Payment, and Bidding Firms' Stock Returns.

This study explores the role of the method of payment in explaining common stock returns of bidding firms at the announcement of takeover bids. The results reveal significant differences in the abnormal returns between common stock exchanges a nd cash offers. The results are independent of the type of takeover b id, i.e., merger or tender offer, and of bid outcomes. These findings supported by analysis of nonconvertible bonds, are attributed mainl y to signaling effects and imply that the inconclusive evidence of ea rlier studies on takeovers may be due to their failure to control for the method of payment. Copyright 1987 by American Finance Association.

The Effect of Corporate Multinationalism on Shareholders' Wealth: Evidence from International Acquisitions.

This study presents direct evidence on the effect of international acquisitions on stock prices of U.S. bidding firms. Shareholders of multinational corporations not operating in the target firm's country experience significant positive abnormal returns at the announcement of international acquisitions. Shareholders of U.S. firms expanding internationally for the first time experience insigni ficant positive abnormal returns, while shareholders of multinational corporations operating already in the target firm's country experience insignificant negative abnormal returns. The abnormal returns are larger when firms expand into new industry and geographic markets-especially those less developed than the U.S. economy. Copyright 1988 by American Finance Association.

Do Stock-Financed Acquisitions Destroy Value? New Methods and Evidence

We contribute to the debate on whether stock-financed acquisitions destroy value for shareholders. A stock-financed acquisition is a joint takeover/equity-issue event. Using seasoned equity offering announcement returns, we estimate through linear prediction and propensity-score matching the share price drop that stock acquirers experience due to the financing choice. Net of this effect, stock-financed acquisitions are not value destructive, and the method of payment generally has no further explanatory power in the cross-section of acquirer returns. Our evidence is largely inconsistent with the agency costs of overvalued equity hypothesis

Credit ratings and the choice of payment method in mergers and acquisitions

This paper establishes that credit ratings affect the choice of payment method in mergers and acquisitions. We find that bidders holding a high rating level are more likely to use cash financing in a takeover. We attribute this finding to lower financial constraints and enhanced capability of highly rated firms to access public debt markets as implied by their higher credit quality. Our results are economically significant and robust to several firm- and deal-specific characteristics and are not sensitive to the method used to measure the likelihood of the payment choice or after controlling for potential endogeneity bias

When It Pays to Pay Your Investment Banker: New Evidence on the Role of Financial Advisors in M&As

We provide new evidence on the role of financial advisors in M&As. Contrary to prior studies, top-tier advisors deliver higher bidder returns than their non-top-tier counterparts but in public acquisitions only, where the advisor reputational exposure and required skills set are relatively larger. This translates into a $65.83 million shareholder gain for an average bidder. The improvement comes from top-tier advisors' ability to identify more synergistic combinations and to get a larger share of synergies to accrue to bidders. Consistent with the premium price–premium quality equilibrium, top-tier advisors charge premium fees in these transactions