Managerial Discretion and Takeover Performance

Abstract

We investigate the relation between long run takeover performance and board share ownership in the acquiring company for a sample of 142 UK takeovers completed between 1985-95. We find evidence of a non-linear relationship both between board ownership and takeover profitability, and between board ownership and post-takeover share returns. We cast the analysis in a simultaneous equations framework using non- linear two-stage least squares, and find that our results are robust to this alternative specification. The results are therefore consistent with a managerial alignment / entrenchment trade-off.Corporate takeovers; board ownership; profitability; long run share returns