TY - JOUR
T1 - Does deregulation induce competition in the market for corporate control? The special case of banking
AU - Ghosh, Chinmoy
AU - Petrova, Milena
N1 - Copyright:
Copyright 2013 Elsevier B.V., All rights reserved.
PY - 2013/12
Y1 - 2013/12
N2 - Using a sample of 936 acquisitions of commercial banks, we examine the relation between the probability to engage in value-reducing acquisitions and corporate governance structures, as well as the relation between acquirer announcement-period abnormal stock returns and antitakeover indices and measures, and how these relations were affected by the change in the market for corporate control, caused by deregulation due to the implementation of the Interstate Banking and Branching Efficiency Act of 1994 and the Financial Service Modernization Act of 1999. We find that prior to deregulation there is no relation between probability to engage in value destroying acquisitions or acquirer returns and antitakeover indices, whereas after the adoption of the FSMA, probability to engage in value destroying acquisitions and the stock market reaction to bidder M&A announcements are both significantly related to governance indexes and measures. Our findings further confirm the linkage between the market for corporate control, antitakeover indices and firm value.
AB - Using a sample of 936 acquisitions of commercial banks, we examine the relation between the probability to engage in value-reducing acquisitions and corporate governance structures, as well as the relation between acquirer announcement-period abnormal stock returns and antitakeover indices and measures, and how these relations were affected by the change in the market for corporate control, caused by deregulation due to the implementation of the Interstate Banking and Branching Efficiency Act of 1994 and the Financial Service Modernization Act of 1999. We find that prior to deregulation there is no relation between probability to engage in value destroying acquisitions or acquirer returns and antitakeover indices, whereas after the adoption of the FSMA, probability to engage in value destroying acquisitions and the stock market reaction to bidder M&A announcements are both significantly related to governance indexes and measures. Our findings further confirm the linkage between the market for corporate control, antitakeover indices and firm value.
KW - Corporate control
KW - Corporate governance
KW - Financial regulation
KW - Mergers and acquisitions
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U2 - 10.1016/j.jbankfin.2013.06.002
DO - 10.1016/j.jbankfin.2013.06.002
M3 - Article
AN - SCOPUS:84885896989
VL - 37
SP - 5220
EP - 5235
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
SN - 0378-4266
IS - 12
ER -