تاثیر درگیری مدیر سهامداران در دستیابی به بازده بانک
|کد مقاله||سال انتشار||تعداد صفحات مقاله انگلیسی||ترجمه فارسی|
|23084||2003||29 صفحه PDF||سفارش دهید|
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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of Banking & Finance, Volume 27, Issue 1, January 2003, Pages 103–131
This paper examines whether shareholder value-maximizing corporate governance mechanisms assist in reducing the managerial incentive to enter value-destroying bank acquisitions. We find that diversifying bank acquisitions earn significantly negative announcement period abnormal returns (AR) for bidder banks whereas focusing acquisitions earn zero AR. We then find that corporate governance variables (such as CEO share and option ownership and a smaller board size) in the bidding bank are less effective in diversifying acquisitions than in focusing acquisitions. These results are robust to the inclusion of the usual control variables.
Several empirical studies have documented a negative relation between firm performance and the level of diversification in a firm's lines of business in the 1980s (see for example, Morck et al., 1990; Lang and Stulz, 1994; John and Ofek, 1995). A possible argument for lower returns from firm-level diversification is the managerial agency argument that CEOs cannot operate unrelated lines of business as efficiently as single or related business segments. Companies therefore do not create value from firm-level diversification when investors can do so more cheaply through portfolio diversification in the financial markets. According to this agency view, value-destroying managerial activities (such as firm-level diversification) can be reduced by designing effective corporate governance mechanisms. In the industrial firm literature, bidders' announcement period abnormal returns (AR) have been found to be positively related to insider share ownership in the year before the takeover (Lewellen et al., 1985; You et al., 1986). However, the CEO pay–performance studies (e.g., Jensen and Murphy, 1990a and Jensen and Murphy, 1990b; Hall and Liebman, 1987) and the board of director literature (e.g., Jensen, 1993; Yermack, 1996) have found other corporate governance variables to have a statistically significant effect on firm value. In this paper, we examine a comprehensive set of corporate governance variables and find many of them to have a significant impact on bidder AR around the announcement of both diversifying and focusing bank acquisitions. We then examine whether these corporate governance mechanisms assist in reducing the managerial incentive to enter value-destroying bank acquisitions. Our results suggest that acquisition announcements for diversifying acquisitions (geographic and activity diversification) produce significantly smaller AR for bidder banks than focusing acquisitions. Specifically, we find that bidder AR are significantly negative in interstate and activity diversifying bank acquisitions and are not significantly different from zero in intrastate and activity focusing bank acquisitions. Importantly we find a differential impact of corporate governance variables on diversifying versus focusing acquisitions. We find that corporate governance variables (such as CEO share and option ownership and a smaller board size) are less significant in diversifying acquisitions than in focusing acquisitions. This might help explain why diversifying acquisitions earn negative AR. We look at diversification along two dimensions; geography and activity. Unlike other industries, the banking industry allows us to examine focusing and diversifying events that are easily observable to the external capital markets. Most previous studies have used SIC codes to classify whether mergers are diversifying or focusing. However, recent research has shown SIC codes to have significant classification issues. For example, Kahle and Wakling (1996) find significant differences between Compusat and Center for Research in Security Prices (CRSP) databases in 36% of the classifications at the two-digit level and nearly 80% at the four-digit level. They also find that these discrepancies are exacerbated among utilities, financial companies and conglomerates. Further, Scarfstein, 1999 shows that segments producing very related products can have very different two-digit SIC codes, as can companies that have vertical relationships (see also Matsusaka, 1993). For the banking industry SIC codes reflect regulatory structure (e.g., federal member bank or state non-member bank) rather than product lines. Thus, researchers cannot use SIC codes to determine activity diversification between two merging banks. Intrastate versus interstate bank acquisitions, however, is a transparent classification scheme to market participants who after all generate the AR. Intrastate acquisitions (where both the bidder and target bank are headquartered in the same state) are focusing acquisitions and tend to concentrate the acquirer's existing market power or brand recognition and allow for greater cost efficiency. Interstate acquisitions (where the bidder extends its operations beyond the state in which it is headquartered by buying a bank whose headquarters are in another state) are diversifying acquisitions. A second observable measure of diversifying versus focusing acquisitions (which is not unique to the banking industry) is the correlation coefficient of daily stock returns for bidders and targets (Morck, 1990; DeLong, 2001). Historical stock return movements that are highly correlated indicate that the bidding and target banks are engaged in similar types of risk and therefore similar types of activities. A merger or acquisition of such banks is activity focusing. Low correlation coefficients of returns indicate that the two banks engage in different types of risks and therefore, activities. A merger or acquisition of such banks would be activity diversifying. DeLong, 1999 and DeLong, 2001 examines bank mergers that focus geographically and by activity and finds that these mergers create value upon announcement. Further, bank mergers that diversify either geographically or by activity do not create value. In this paper we extend DeLong's work by examining abnormal announcement period returns in bank acquisitions that focus operations (geographically or by activity) versus acquisitions that diversify, and relate these AR to a comprehensive set of corporate governance mechanisms that have been shown (in other contexts) to reduce the manager–shareholder conflict. Accordingly, we examine whether focusing/diversifying acquisitions might affect announcement period AR differentially, and how corporate governance mechanisms affect these AR. As Shleifer and Vishny (1988, p. 15) state: “In our interpretation of the acquisition process, non-value-maximizing behavior of bidders plays a central role. … before stressing the role of takeovers in eliminating non-value-maximizing behavior by managers of target companies, it is important to remember the managers of bidding firms. For them, the purchase of other companies at inflated prices may be the grandest deviation from value maximization.” The remainder of the paper is organized as follows. In Section 2 we identify the different corporate governance mechanisms that have been suggested in the literature to reduce the manager–shareholder conflict. 3 and 4 describe the control variables, data and methodology used. Our results are presented in Section 5. Finally, Section 6 concludes the paper.
نتیجه گیری انگلیسی
This paper examines whether shareholder value-maximizing corporate governance mechanisms assist in reducing the managerial incentive to enter value-destroying bank acquisitions. We look at announcement period abnormal stock returns for diversifying (interstate or activity) acquisitions versus focusing (intrastate or activity) acquisitions. We find that the announcement period AR earned by the bidder banks are significant and negative for diversifying bank acquisitions but not for focusing acquisitions. Further, we find that corporate governance mechanisms that reduce the manager–shareholder conflict are not as effective in diversifying acquisitions as they are in focusing acquisitions. If corporate governance mechanisms used to control the manager–shareholder conflict are less effective in interstate diversifying acquisitions these acquisitions are less likely to be value maximizing. Thus, shareholders and bank regulatory agencies should be more vigilant of interstate or activity diversifying acquisitions, given that the bank's internal governance mechanisms are not as effective at encouraging value maximization.