The governance transfer of blockholders: Evidence from block acquisitions and earnings management around the world

Lili Dai, Ravi Dharwadkar, Linna Shi, Bohui Zhang

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

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.

Original languageEnglish (US)
Pages (from-to)586-607
Number of pages22
JournalJournal of Corporate Finance
Volume45
DOIs
StatePublished - Aug 1 2017

Fingerprint

Blockholders
Earnings management
Governance
Monitoring
Corporate governance
Economics
Monitoring costs

Keywords

  • Block acquisition
  • Earnings management
  • Governance transfer
  • International financial markets

ASJC Scopus subject areas

  • Business and International Management
  • Finance
  • Economics and Econometrics
  • Strategy and Management

Cite this

The governance transfer of blockholders : Evidence from block acquisitions and earnings management around the world. / Dai, Lili; Dharwadkar, Ravi; Shi, Linna; Zhang, Bohui.

In: Journal of Corporate Finance, Vol. 45, 01.08.2017, p. 586-607.

Research output: Contribution to journalArticle

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