The author is from the Department of Economics and Finance, La Trobe University. He gratefully acknowledges the helpful comments from an anonymous referee, research assistance provided by Brien McDonald and comments and suggestions from John Manley and participants at the 10th Annual Conference of the Multinational Finance Society in Montreal, Canada in 2003.
Directors’ Recommendations in Takeovers: An Agency and Governance Analysis
Version of Record online: 7 FEB 2005
Journal of Business Finance & Accounting
Volume 32, Issue 1-2, pages 129–159, January 2005
How to Cite
Henry, D. (2005), Directors’ Recommendations in Takeovers: An Agency and Governance Analysis. Journal of Business Finance & Accounting, 32: 129–159. doi: 10.1111/j.0306-686X.2005.00590.x
- Issue online: 7 FEB 2005
- Version of Record online: 7 FEB 2005
- (Paper received July 2003, revised and accepted October 2003)
- directors’ recommendations;
- corporate governance;
- agency theory
Abstract: This paper evaluates whether directors of target companies make response recommendations in takeovers which are consistent with the interests of shareholders, by examining the relationship between target director recommendations and associated takeover characteristics and ownership and corporate governance characteristics of target companies. The findings suggest that response recommendations appear to be more closely associated with the self-interest of directors rather than shareholders’ concerns, and that common governance initiatives aimed at aligning the interests of shareholders and managers are ineffective in resolving this agency problem. The results suggest the need for legislative or judicial reforms in Australia to encourage takeover activity and reduce takeover hostility.