TY - JOUR
T1 - The governance transfer of blockholders
T2 - Evidence from block acquisitions and earnings management around the world
AU - Dai, Lili
AU - Dharwadkar, Ravi
AU - Shi, Linna
AU - Zhang, Bohui
N1 - Publisher Copyright:
© 2017 Elsevier B.V.
Copyright:
Copyright 2017 Elsevier B.V., All rights reserved.
PY - 2017/8
Y1 - 2017/8
N2 - We examine the governance transfer effect of corporate blockholders in a sample of 892 block acquisitions across 42 countries from 1990 to 2008. Using earnings management as a proxy for corporate governance outcome, we find that target firms' earnings management is aligned with that of block acquirers after acquisitions, implying that blockholders transfer their own governance quality to investee firms. We further identify three economic mechanisms that underlie the governance transfer effect, namely, monitoring effectiveness, monitoring cost, and monitoring environment. Our findings provide new insights into the governance role of blockholders.
AB - We examine the governance transfer effect of corporate blockholders in a sample of 892 block acquisitions across 42 countries from 1990 to 2008. Using earnings management as a proxy for corporate governance outcome, we find that target firms' earnings management is aligned with that of block acquirers after acquisitions, implying that blockholders transfer their own governance quality to investee firms. We further identify three economic mechanisms that underlie the governance transfer effect, namely, monitoring effectiveness, monitoring cost, and monitoring environment. Our findings provide new insights into the governance role of blockholders.
KW - Block acquisition
KW - Earnings management
KW - Governance transfer
KW - International financial markets
UR - http://www.scopus.com/inward/record.url?scp=85020773148&partnerID=8YFLogxK
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U2 - 10.1016/j.jcorpfin.2017.06.004
DO - 10.1016/j.jcorpfin.2017.06.004
M3 - Article
AN - SCOPUS:85020773148
SN - 0929-1199
VL - 45
SP - 586
EP - 607
JO - Journal of Corporate Finance
JF - Journal of Corporate Finance
ER -