اداره امور شرکت ها و تقویت اخیر در صنعت بانکداری
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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of Corporate Finance, Volume 6, Issue 2, 1 July 2000, Pages 141–164
Using the universe of publicly traded banks at year-end 1993, we find that target banks' outside directors, but not inside directors, tend to own more stock than their counterparts in other banks. Having an outside blockholder is also associated with banks becoming targets. In contrast to existing research on industrial firms, board structure does not help determine which sample banks sell. Neither the fraction of outsiders on a bank's board nor having an outside-dominated board differentiate the target banks in our sample. Instead, outside directors/shareholders and blockholders appear to be primarily responsible for encouraging bank managers to accept an attractive merger offer
Financial economists have long recognized that the widespread separation of ownership and control in large US corporations creates the potential for costly agency conflicts. Dispersed shareholders' limited incentive to monitor the behavior and performance of the agents hired to run their firm can give managers substantial freedom to pursue their own interests at the expense of shareholder wealth. Absent mechanisms to control managerial behavior, usually called “corporate governance structures,” wealth maximization will not exclusively motivate corporate decision-making. A company's board of directors is one of the mechanisms within the firm to monitor and control managerial behavior.1 The board hires, fires, and compensates a firm's top management. However, board members are subject to their own agency problems. A firm's chief executive officer (CEO) is generally a member of, and is often the chairman of, the board of directors. CEOs typically also play a major role in selecting new nominees for the board (Lorsch and MacIver, 1989). If board members are strongly influenced by or beholden to the firm's top officers, it is unclear whether the board can successfully align shareholder and manager interests. The banking industry's ongoing consolidation offers an excellent experimental setting for examining board effectiveness. During the last decade, technological advances in communication and information technologies have reduced the costs of having a geographically dispersed banking organization. Simultaneously, laws and regulations that had previously fragmented the banking industry have been relaxed or, in some cases, eliminated.2 The joint effect has been a dramatic surge in merger activity that has sharply reduced the number of US banks (Holland et al., 1996). Similar to acquisitions by industrial firms, the lion's share of takeover gains in bank mergers goes to target shareholders (see Jensen and Ruback (1983) for a summary of industrial takeover research). For example, in a sample of 153 bank acquisitions between 1985 and 1991, Houston and Ryngaert (1994) find that target banks earn positive average abnormal returns of 14.4% and bidder shareholders suffer negative average abnormal returns of −2.3%. In contrast to target shareholders' gains, a target bank's managers tend to find themselves out of a job after being acquired while the bidding bank's managers preside over the newly merged institution. Hadlock et al. (1999) find that more than one-half of the top executives in their sample of target banks are not employed by the buying bank 2 years after the acquisition. Because shareholders tend to benefit from being acquired while managers generally lose both future compensation and prestige if their firm is acquired, takeovers epitomize how shareholder and managerial interests can collide. The natural divergence of target shareholder and manager incentives in response to a merger bid makes takeovers a model experiment for exploring the firm characteristics that are associated with managers acting in shareholders' interests. However, past research attempting to discern target firms' distinctive characteristics have met with limited success (see, for example, Hasbrouck (1985) and Palepu (1986)). One potential problem is that sample size requirements generally dictate using acquisitions from many different industries over a wide time period. Having this heterogeneous sample will likely decrease the power of any statistical comparison, despite the authors best efforts to control for differences (by, for example, industry-adjusting financial characteristics). Having a heterogeneous sample is a particular problem when evaluating corporate governance characteristics because it is prohibitively expensive to gather data on the universe of all possible targets in order to control for industry or temporal variation. This paper exploits the banking industry's recent consolidation to explore what corporate governance characteristics are associated with managers acting in shareholders' best interests. Banks provide a useful experiment because the burst of recent merger activity in this historically fragmented industry allows us to study a reasonably large sample of very homogeneous firms. Additionally, because the need for regulatory approval makes hostile bank takeovers particularly difficult, the target bank's cooperation is generally a prerequisite for a bank merger (Prowse, 1997). Therefore, governance structures that amplify an institution's concern for shareholder wealth may play a greater role in determining the targets of bank acquisitions than the targets of industrial takeovers. Our study uses all publicly traded banks with data available at year-end 1993 that were not in the process of being acquired. Sixty-one (19%) of these 321 potential target banks were subsequently acquired during the next 3 years. We find that higher director and officer (D&O) ownership greatly increases the likelihood that a sample bank sells. Upon further examination, however, we find that outside director ownership drives this result: targets' outside directors, but not inside directors or officers, tend to own more stock than their counterparts in other banks. This holds whether we compare target banks to all other banks, compare targets to matched samples of other banks, or measure the marginal impact of director ownership in a logistic regression while controlling for other bank characteristics. In addition to outside director ownership, we find that having an outside blockholder also makes a bank more apt to sell. Other commonly studied governance variables, however, do not differentiate the target banks in our sample. The fraction of outsiders/insiders on a bank's board is unrelated to a bank's willingness to sell. Additionally, target banks are no more likely than other banks to have an outside-dominated board. There is also no consistent relation between our insider ownership variables and which banks become targets. It appears that outside directors/shareholders and outside blockholders are primarily responsible for encouraging bank managers to accept a merger offer. Our results suggest that board ownership, particularly outside director ownership, can play a crucial role in effective corporate governance. Although outside directors bear some personal costs in a takeover (most of a target's outside directors do not join the merged company's board), these costs are small compared to those borne by the firm's top officers. This appears to give outside directors' equity ownership a far greater marginal impact than the equity ownership of insiders. Additionally, insider ownership is a double-edged sword. Although it can align manager and shareholder interests, it can also entrench managers, insulating them from external discipline. There is no corresponding downside to outside director ownership. We also examine the cross-sectional relation between target governance and the gains from a takeover (measured using the target's announcement return). Consistent with previous research on industrial takeovers (Cotter et al., 1997), having an outside-dominated board is associated with greater target gains. D&O ownership and target takeover gains are weakly negatively related in our sample, although this result is driven by inside director ownership. Oddly, having an outside blockholder is associated with lower announcement returns. Many industries have experienced substantial consolidation during the 1990s. How efficiently these industries evolve depends in part on managerial incentives. Our study of the banking industry in the 1990s describes how corporate governance has affected consolidation in this particular sector, and, hopefully, provides a foundation for exploring other industries. It is important to recognize, of course, that our focus on the highly regulated banking industry may limit the generality of our results. The rest of the paper is organized as follows. The first section reviews the relevant existing literature. The second presents our sample and data. The third explores the differences between the sample banks that do and do not become targets. The fourth section analyzes the cross-sectional distribution of target announcement returns. The fifth section concludes.
نتیجه گیری انگلیسی
The banking industry's recent consolidation provides an excellent opportunity to evaluate which governance structures tilt corporate decision-making toward shareholder wealth maximization. Technological advances and deregulation have shifted the optimal number of banks downward, creating pressure to merge. Bank shareholders receive a substantial premium if their bank is acquired. Conversely, announcement returns suggest that a typical bank merger hurts the acquiring banks' shareholders. Bank managers, however, have an incentive to make their bank one of the surviving institutions. Because shareholder and manager interests diverge, which banks end up becoming targets provides valuable evidence about corporate governance efficacy. Using the universe of available publicly traded banks at year-end 1993, we find that almost one-fifth are acquired in the next 3 years (defined as the merger being announced and completed between 1/1/94 and 12/31/96). Target shareholders receive a substantial premium in these takeovers: targets rise an average of over 18% at the merger announcement (net of market). Bidders, however, drop an average of more than 2% at the merger announcement. Using a variety of empirical methods, we document a strong and consistent link between outside director equity ownership and banks becoming takeover targets. Because agreeing to a merger systematically benefits target shareholders, outside director ownership appears to focus decision-making on shareholder wealth maximization. We also find a greater frequency of outside blockholders in the banks that become targets, suggesting that large non-director shareholders can also encourage banks to act in shareholders' best interests. Our results provide an interesting contrast to the existing literature. Although outside ownership is associated with banks being acquired, neither insider ownership nor outside-dominated boards are consistently associated with banks becoming targets. Although past research has had limited success predicting successful takeovers using ownership variables, the bulk of the evidence suggests that substantial insider ownership impedes takeovers. In our sample, inside ownership inhibits takeovers only when insider director ownership exceeds outside director ownership. Past research using industrial firms tends to find that having an outside-dominated board improves corporate decision-making, but little evidence that greater outside director ownership is associated with shareholder wealth maximization. We find the reverse in our sample of bank mergers. At the same time, we are able to replicate Cotter's et al. (1997) result that firms with outside-dominated boards tend to respond more positively to takeover announcements. This divergence of results suggests that outside ownership and presence of outside directors may play discrete roles — outside ownership helps put the firm “in play” while outside directors make sure shareholders receive the largest premium possible once merger negotiations begin. Future studies will need to explore these potentially different roles more carefully.