Discussion of 'Takeover activity, CEO turnover and the market for corporate control.' (comment on V.A. Kennedy and R.J. Limmack in this issue, p. 267)(Special Issue: Selected Papers from the Conference on Empirical Research in Business Finance and Accounting, May 1995)

Article Abstract:

The three hypotheses advanced in an examination of the theory that takeovers act as a disciplinary mechanism on non-wealth maximizing management are analyzed. The first, which states that target firms generally underperform in the period before a takeover bid, is a weak test of the theory that inefficient firms will be taken over by more efficient firms. The second hypothesis that pre-bid returns to target firms subject to 'disciplinary' takeovers are lower than that of other targets appears reasonable, though it is difficult to identify disciplinary takeovers. As for the third, it is difficult to make predictions on the volume of wealth increase, as there is no theory about relative gains from various classes of target.

Employee turnover

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Discussion of 'An Examination of the Long Run Performance of UK Acquiring Firms.' (response to Alan Gregory in this issue, p. 971)

Article Abstract:

An argument on the negative assumption of returns based on examination of the long run performance of UK acquiring firms is presented to negate the conclusion of the study. Although the analysis was comprehensively done, the study's assumption was inconclusive because some important factors such as inefficiency of the market and interests of the diversifying companies included in the bidding for the takeover were not emphasized. Furthermore, the methods and models used in the examination might be inappropriate for its purpose.

Acquisitions & Mergers Analysis, Financial analysis, Return on investment, Rate of return

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Directors' recommendations in takeovers: an agency and governance analysis

Article Abstract:

The impact of directors' role in acquisition process, on shareholder relations, is examined.

Australia, Financial management, Corporate governance, Beliefs, opinions and attitudes, Investor relations, Agency theory, Executive directors

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