strukturhargariklantelevisisebuah jurnal.pdf

7/27/2019 strukturhargariklantelevisisebuah jurnal.pdf

1/20

Journal of Business and Policy Research

Volume 5. Number 2. December 2010 Pp. 217236

The Effects of Ownership Structure on Operating

Performance of Acquiring Firms in Emerging Markets

Tze-Yu Yen and Paul Andr

This paper determines the effect ofownership structure, governancemechanisms, and legal systems on longterm operating performance of acquiringfirms in emerging countries. The majorfinding is that the acquiring firms withcontrolling shareholders (especially holdingownership between 25%-30%) improvepost acquisition operating performance

over three years after transaction. Boardcomposition indexes for acquiring firms inemerging countries are more influential topost acquisition performance than those ofCEO position and block-holders. Valuecreating deals associate with higher qualityaccounting standards and superior investorprotection of emerging market countries.

Field of Research: Mergers and Acquisitions, Ownership Structure,

Corporate Governance, Legal Institutions, Emerging Markets

1. Introduction

One of the most important drivers of corporate performance in the past twentyyears is the level of merger and acquisition (M&A) activities companies areinvolved in. The 1990s merger wave peaked in 2000 encompassed mega-deals, globalization, and consolidation in telecommunications, media, andtechnology (TMT) industries. Companies invested billions of dollars makingacquisitions but most empirical studies show that shareholders of acquiringfirms experienced significant loss on average, or at best broke even (Agrawal,Jaffe & Mandelker, 1992; Goergen & Renneboog, 2004). The lessons of this

wave not only moved academics to investigate factors leading to valuereduction, but also gave rise to the revolution in corporate governance amongcompanies worldwide.

Data supplied by Thomson Financial (TOB) indicate that the pace of therecent merger wave has been gradually recovering and strengthening since2002. A significant aspect of this trend has been the rapid growth of AsianM&A transactions with a non-large amount deals value. With strong financialresources and broad domestic markets, these emerging market businesses

Tze-Yu Yen, Department of Finance, National Chung Cheng University, email:[email protected] Andr, Business School, ESSEC, email: [email protected]
mailto:[email protected]:[email protected]:[email protected]


2/20

Yen & Andr

218

have not only consolidated domestic enterprises to gain size advantage, butalso attempted to make a giant leap forward in Europe and the United Statesmarket by conducting global M&As. To be expected, emerging competitors inthe near future will present a potential threat to companies in developedcountries and change the face of the world economy.

A recent leading work by La Porta, Lopez-de-Silanes & Shleifer (1999) points out that one ortwo shareholders who own a large percentage of the firms shares control most publiccorporations worldwide. Especially in emerging market countries, a particular family often

controls corporations and listed companies. Controlling owners may have moreincentive to maximize firm value because firm performance closely links totheir welfare (Jensen & Meckling, 1976; Shleifer & Vishny, 1986).But whenowners cannot separate their own financial preference from those of minorityshareholders, they have more power to act on their own interest at theexpense of firm performance through specific corporate decisions (La Porta etal., 1999; Claessens, Djankov & Lang, 2000).

The affect of ownership concentration on corporate performance is still aquestion for discussion. In general, the solution for these agency concerns isto enhance monitoring mechanisms in corporate systems (firm-level) andrequest the Government to enact a comprehensive law to protect investors(country-level). This paper joins the ongoing debate by investigating theeffects of concentrated ownership, governance mechanisms, and legalprotection on corporate performance of acquiring firms in emerging marketcountries. Referring to arguments that short term market performance maynot fully capture anticipated benefits from an acquisition (Hitt, Harrison,Ireland & Best, 1998), this paper follows the work of Healy, Palepu & Ruback

(1992) and takes long term operating cash flows as performance measures toexamine M&A value creation.

Based on a sample of sixty-nine deals over 1998-2004 in thirteen emergingcountries including English, German, and French legal origins, we find thatacquiring firms with controlling shareholders (especially holding ownership between 25%-30%) improve post acquisition operating performance over three years after transaction.Board composition indexes for acquiring firms in emerging countries are more influential to

post acquisition performance than CEO positions and block-holders do. Value creatingdeals associate with higher quality accounting standards and superior investorprotection of emerging markets.

2. Literature Review

Prior studies focusing on the relationship between ownership and firmperformance show that firm value increases with ownership of the largestshareholders (McConaughy, Walker, Henderson & Mishra, 1998; Claessens,Djankov, Fan & Lang, 2002; La Porta, Lopez-de-Silanes, Shleifer & Vishny,2002; Anderson & Reeb, 2003). In contrast, other studies suggest that withouteffective monitoring, controlling shareholders are likely to exploit minorityshareholders and make sub-optimal decisions when control rights exceedcash flow rights (Faccio, Lang & Young, 2001; Cronqvist & Nilsson, 2003).

Many studies also suggest that the relationship may not be linear (Anderson &Reeb, 2003; Morck, Shleifer & Vishny, 1988; McConnell & Servaes, 1990).


3/20

Yen & Andr

219

Another branch of ownership research centers on separation problems whichindicate that controlling shareholders often have greater control rights thancash flow rights because of pyramidal structures, cross-holdings, dual classshares, and various other control devices (La Porta et al., 1999; Claessens etal., 2000). This separation provides an opportunity for controlling shareholders

to expropriate minority shareholders and therefore has a significantly negativeeffect on firm performance (Claessens et al., 2000; La Porta et al., 2002; Faccio & Lang,2002; Cronqvist & Nilsson, 2003).

Based on the costs of concentrated ownership, governance research hasgenerally examined the following mitigating factors. The first one is boardstructure.Academics, regulators, and shareholder activists generally suggestthe size of the board (not too large and not too small) and separating theCEO/COB position leads to better governance (Rosenstein & Wyatt, 1990;Weisbach, 1988; Vefeas & Theodorou, 1998; Brickley, Coles & Jarrell, 1997). Thesecond factor is CEO position. Whether an individual who is the dominant

shareholder should occupy the seat of CEO is still debatable. Anderson &Reeb (2003) suggested that with effective outside monitors, family CEOsmight provide essential firm-specific expertise and reduce agency problems.Many researchers, however, offer a different view: dominant CEOs may moreeasily entrench themselves and thus deviate from firm value maximization(Sharma & Ho, 2002; Barth, Gulbrandsen & Schonea, 2005). The third factorrelates to other large shareholders. Large block holders such as institutionalinvestors, have the means to monitor and influence the controllingshareholder (Andr, Kooli & L'Her, 2004). Maury & Pajuste (2005) showedthat not only the presence, but also the equal distribution of voting sharesamong block holders, has positive effect on firm value.

Recent papers have emphasized the importance of legal institutions inprotecting investors and limiting self-dealing by controlling shareholders. LaPorta, Lopez-de-Silanes, Shleifer & Vishny (LLSV, 1998) formed an anti-director rights index to measure the level of shareholder rights and concludedthat the average anti-director right index in English origin countries issignificantly better than that in the other countries with different legal origins.

Comparing to the wide discussion about corporate governance mechanismson general firm performance, there is relatively scarce theoretical or empirical

research to provide evidence on the relationship between governancemechanisms and specific acquisition performance. One stream of governanceresearchers proved the incentive effect by showing that increasing insidersownership has positive effect on acquirers returns (Lewellen, Loderer &Rosenfeld, 1985; Carline, Linn & Yadav, 2002; Yen & Andr, 2007). However,the other stream of governance researchers has argued that majorityshareholders, have stronger power to expropriate minority shareholders viaM&A events, especially when they can separate their control rights from theircash flow rights (Conyon & Murphy, 2002; Holmen & Knopf, 2004; Bae, Kang& Kim, 2002; Ben-Amar & Andr, 2006; Faccio & Stolin, 2006).

Researches regarding the effects of ownership, governance mechanisms, andlegal/ extralegal systems on M&A performance in emerging markets are even


4/20

Yen & Andr

220

rare. Previous literature investigating the impact of emerging markets targetsthe acquisition performance of cross border deals. This stream of studiesgenerally finds that corporate governance quality of target nations affectsacquisition performance (Moeller & Schlingemann, 2005; Bris & Cabolis,2002; Fauver, Houston & Naranjo, 2003; Chari, Ouimet & Tesar, 2004;

Michael, Emmanuel & Alfred, 2008). Studies have ignored the characteristicsof acquiring firms from emerging countries for a long time. Bae et al. (2002)studying for Korean companies presented a comparable research with thispaper, but they tested the traditional market based abnormal returns andfocused only on a single country. Implications for emerging markets andoperating performance measures in need of additional research arediscussed.

3. Data and Research Methodology

3.1 Sample Selection

The data set of this project was obtained from the Thomson FinancialSecurities Datas SDC PlatinumTM Worldwide Mergers & AcquisitionsDatabase. This sample meets the following criteria: 1) Observations are from1998-2004; 2) Acquiring firms are from countries included in the MSCIemerging market (EM) index; 3) Deals are completed and are mergers,exchange offers, or acquisitions of a majority interest; 4) Companies withseveral M&A during the period are included; 5) Acquiring firms and targets arepublic companies; 6) Government, financial, and investment companies areexcluded because of their specific accounting and regulatory requirements; 7)

Companies have financial and accounting data for the seven-year window,and ownership data is available from proxies or annual reports of eachcompany from company websites. Our final sample includes sixty-nine deals(46 acquiring firms) in thirteen emerging market countries.

Table 1, panel A reports the annual numbers, aggregate values, and meanvalues of deals. The sample comprises sixty-nine acquisitions with a totalmarket value of over US$16 billion. Acquiring firms paid, on average (median),US$235.6 (119.1) million for the targets. Panel B presents acquisitions byprimary SIC code. The largest proportion of deals is in the manufacturingsector. Panel C lists firms and deal values by country. Most deals are initiated

in South Africa (21.7%) followed by Brazil (20.3%), and Taiwan (14.5%). Theother deals are spread across the following countries: India, Malaysia,Argentina, Russian Fed, Chile, Hungary, Indonesia, Mexico, Philippines, andThailand.


5/20

Yen & Andr

221


6/20

Yen & Andr

222

3.2 Variables

3.2.1 Dependent Variable

Based on Healy et al. (1992), this paper used pre-tax operating cash flow

(OCF) to measure acquisition performance and defined operating cash flowas operating income after depreciation plus depreciation and goodwillamortization, i.e. EBITDA. This definition ensures that performance measureis unaffected by different merger accounting methods, tax policy, or the type offinancing used to fund the acquisition. Operating cash flow return ( OCFR) iscalculated as operating cash flow divided by market value of asset.

Operating cash flow returns are computed for each company up to threeyears before and after the acquisition event. Pre-acquisition performance iscalculated as a weighted-average of the operating cash flow rate for thebidder and the target. The weights are based on the market values of assets

of both companies the year before acquisition. The median of OCFR threeyears before and after acquisition (MEGpre and MEGpost) is used. Thismeasurement is consistent with that of Healy et al. (1992 and 1997) andGhosh (2001). In addition, following Ghoshs (2001) critique of Healy et al.(1992), we set the criteria to select a list of matched firms based on size,industry, and pre-performance. The industry, size, and pre-performanceadjusted operating cash flow return (ACFR) is the operating cash flow returnof the merging firm minus that of the matched pair of firm. Similar to Healy etal. (1992), the median ofACFR three years before and after acquisition(ACFRpreandACFRpost) is calculated. The post performance (ACFRpost) isexamined as our major performance metric (Loughran & Ritter, 1997; Linn &Switzer, 2001; Rahman & Limmack, 2004; Powell & Stark, 2005).

3.2.2 Independent Variables

Independent variables in this project were primarily grouped into fourcategories: ownership variables; governance variables; legal variables andtypical deal variables. Country variables were set to control the countryeffects. Table 2 illustrates the detailed definition of each variable. The codingapproach for ownership variables is similar to prior research (Faccio & Lang,2002; Yen & Andr, 2007). This study included seven dummy ownership

variables reflecting different voting share thresholds held by the largestshareholder. The first dummy variable (OWN10) was for companies having alarge shareholder holding more than 10% of the voting shares. Studies havebroadly used the 10% level as a cut point to test the difference betweendispersed and concentrated ownership structures because it provides asignificant stake and most countries mandate disclosure at this level or lower(La Porta et al., 1998; Faccio et al., 2001). The second dummy variable(OWN20) was set for companies whose large shareholder holding was morethan 20% of voting shares because some literature has argued that 20%might be a better cut-off point to define ownership concentration (Demsetz &Lehn, 1985; La Porta et al., 1999; Claessens et al., 2000; Faccio et al., 2001).

Furthermore, consider that when a large shareholder holds more than 50% ofthe voting shares, it not only dominates, but legally controls the firm (Becht &


7/20

Yen & Andr

223

Roell, 1999; Faccio & Lang, 2002). Therefore, we set the third dummyvariable (OWN50) at the 50% threshold to examine this specific ownershipstructure. The other dummy variables for ownership concentration between10-20% (OWN1020), 20-25% (OWN2025), 25-30% (OWN2530), and 30-50%(OWN3050) were created to identify the effects of different ownership

categories.


8/20

Yen & Andr

224


9/20

Yen & Andr

225

This research also used a continuous variable (OWN) to measure the actualpercentage of voting shares held by the largest shareholder (from 10% ormore). The variable was squared and cubed to capture the potential non-linear relationship between controlling ownership and acquiring performanceas in other previous research (Morck et al., 1988; McConnell & Servaes,

1990; Anderson & Reeb, 2003 ; Yen & Andr, 2007).

4. Empirical Results

4.1 Operating Cash Flow Returns

Table 3 presents the operating cash flow returns for the merged and matchedfirms and the adjusted operating cash flow rates. The results in panel A showthat the median operating cash flow return for merged firms (MEG i) in thethree years before acquisition range from 12.06% to 18.11% and from 11.76%to 12.13% for matched firms (MATi) . The same measure of industry, size, andpre-performance adjusted return (ACFRi) for year -3, -2, and -1 is -1.08%,0.12%, and 3.51%. The measures concurrently increase from year -3 to -1and are significantly positive at the end of the year before transaction. Inaddition, the median adjusted return over the three-year pre-acquisition period(ACFRpre) is 0.95% and statistically different from zero. The measure ofmean operating performance draws similar conclusions.

On the other side, the median measures of operating cash flow return formerged firms (MEGi) in each of the three post acquisition years are from15.62% to 17.84% and from 13.43% to 13.90% for matched firms (MATi). The

same measure of adjusted return (ACFRi) for year +1, +2, +3 and over thepost three years (ACFRpost) is 0.48%, 2.82%, 1.13%, and 1.13% insequence. All the figures are positive and distinguishable from zero except theyear +1. The results of the mean measures are consistent.

These findings demonstrate that merged firms in the study sample arecompetitive with the benchmark firms before M&As and especially outperformin the last year before transactions. This result coincides with prior studies(Healy et al., 1992; Ghosh, 2001) but contradicts Yen & Andr (2007), whichsample firms from English origin countries. Compared to their rivals, while theacquiring firms in our sample lose their superiority right after M&As

(insignificant at year +1), they still achieve better results overall on long-termoperating performance after transactions (ACFRpost is significantly differentfrom zero at the 5% level). This result is consistent with that reported by Healyet al. (1992) for US deals, Powell and Stark (2005) for UK deals, and Yen &Andr (2007) for English origin deals.

However, in panel B, we present the regression results of the three-year postoperating adjusted cash flow returns (ACFRpost) on the three-year preacquisition adjusted returns (ACFRpre). The intercept (0.012) is positive butnot significantly different from zero, indicating that the operating performancein our sample does not significantly improve in the post-acquisition period

after controlling for pre-performance effects. This result proposes a differentview from prior operating performance literature (Healy et al., 1992 and 1997;


10/20

Yen & Andr

226

Yen & Andr, 2007), but in some degree proves the good performance ofacquiring firms from emerging markets before transactions. M&A activitiescould not create abnormal industry, size, and pre-performance adjustedreturns for these acquiring firms. The slope coefficient (0.661) is positive anddifferent from zero. Therefore, the slope coefficient captures persistence over

time, consistent with the results of Healy et al. (1992 and 1997), Ghosh(2001), and Yen & Andr (2007).


11/20

Yen & Andr

227

4.2 Descriptive Statistics and Univariate Analysis

Table 4, panel A displays summary statistics of all variables for the fullsample, and examines the relationship between performance and eachvariable on a univariate basis. For ownership variables, acquiring firms with a

concentration ownership structure above the 10% threshold (OWN10) aredominant (86%) in our sample. At a 20% cut off (OWN20), we found a 72%concentration that is very close to the figure (70%) in the La Porta et al.(1999) research. Using 50% cut off (OWN50), 25% of cases in our sample areconcentrated. In addition, the median (mean) voting share of the largestshareholder (OWN) is 34.59% (39.79%). The univariate results show thatvoting share percentage of the largest shareholder positively correlates withperformance, but not significantly. The only group with significantoutperformance in the post acquisition period is the acquiring firms with thelargest shareholder stakes from 25% to 30% (OWN2530).

For governance variables, separation of voting and cash flow rights (SEP) is13% of the sample. This ratio is not as high as expected for acquiring firmsfrom emerging markets, but closer to that (15%) in Yen & Andr (2007)examining English origin countries. The mean (Median) board size (B_Size) is9.62 (10.00), on average. Seventy-five percent of acquiring firms have aboard with an audit committee (B_Aud i t) but they significantly underperformtheir peers on post performance at the 1% level of significance. The mean(median) ratio of independent directors on the board ( INDDIR) in our sampleis 0.6 (0.58). The post acquisition performance significantly improves withincreasing this independent director ratio in our acquiring firms. The CEO isalso Chairman of the board (CEOdual) in 28% of cases; there is a linkagebetween CEOs and the largest shareholder (CEOLSH) in 10% of cases. Bothgovernance variables focusing on manager characters are not significant.Fifty-nine percent of cases across all sample countries have multiple block-holders (LSHs). The existence of block-holders positively correlates withperformance, but not significantly.

Legal variables weakly relate to post adjusted cash flow returns (ACFRpost)by the univariate test. According to the anti-director rights index (Ant id i r_H) ofLLSV (1998), 49% of deals classify as countries with a high score (more than4). Companies with high anti-director rights indexes have a lower mean and

median measure (0.80%, 0.34%) but the difference is not significant. Beyondthe investors protection law (anti-director right), this study investigates lawenforcement. Referring to Nenova (2003), we mainly use the measure for ruleof law (Enforce_ruleof law) from LLSV (1998). The mean (median) score ofthe rule of law is 5.82 (5.51) for all countries in our sample and companieswith stronger law enforcement have better performance measures. We alsotested the quality of accounting standards (ACCOUNT), another proxy appliedin LLSV (1998). We found that the mean (median) score of the accountingstandard is 62.35 (61.00) for the sample countries and the accounting qualityis negative, but the effect is economically trivial to post adjusted returns. Whileexisting governance research focuses mostly on the function of legal

institutions, the current work draws attention to the features of extra-legalinstitutions by analyzing a variable (XLegal) introduced in Dyck & Zingales


12/20

Yen & Andr

228

(Dyck-Zingales, 2004). The mean (median) rank score is 23.91 (23.00) ofsample countries and the univariate test results show an insignificant andnegative correlation (-0062) with performance.

For deal characteristics, 35% of deals are with targets from English-origin

countries (T_Engl ish) and 28% of cases are cross border deals(Cross_Border). Most deals (87%) in our sample are friendly (Att i_F). Thirty-two percent of deals are pure stock deals (Pay_Share); 57% of deals are classified as both

target and acquirer in the same industry with the same 2-digit SIC code ( Industry_rel); and

acquirers initiate 61% of deals with a toehold (Toehold). The mean (median) 4-week

premium (Prem_4wks) is 21.79% (10.91%) overall. The average size (Size-rel) oftargets is about 57% smaller than that of acquirers and the average level ofacquirers leverage (LEV) is relatively high (48%) for emerging market dealscompared to 21.5% in Maury (2005) for Western European firms and 16% inYen & Andr (2007) for English origin deals.

Among the deal variables, only two variables have a significant relationshipwith post acquisition performance. Cross border transactions (Cross_Border)are statistically low in our study for emerging markets because acquirersmight face obstacles that offset possible advantages when entering newmarkets (Campa & Hernando, 2004; Andr et al., 2004). Related M&A(Industry_rel) is also documented with significantly poor performance in thelong run. These findings are consistent with some studies which suggest thatconglomerate mergers may raise entry barriers, reduce systematic risk,improve income stability, and lower capital costs (Limmack & McGregor, 1995;Andr et al., 2004).

4.3 Regression Results

Table 5 reports the regression results for the operating performance measureon ownership structure after controlling for pre-performance, governancemechanisms, legal variables, and transaction characteristics. All models aresignificant and that adjusted R2 are between 54.1 and 57.3 percent. Lookingat ownership, acquiring firms with a large shareholder holding of more than10% ownership (OWN10) outperform widely held firms (model 1). Likewise,the presence of a large shareholder holding more than 20% ownership(OWN20) significantly improves post performance by 6.7% (model 2).

When we further separate firms with large shareholders over 20% ownershipinto two groups (between 20% and 50% (OWN2050) and more 50%(OWN50)), the OWN2050group outperforms (model 3). Turning to the actuallevel of concentration, the linear model (models 4) suggests that postperformance increases by 3.9% for a one percent change in concentration(but not significantly). These findings verify the results in univariate tests andposit that after controlling for governance mechanisms and dealcharacteristics, value-creating deals associate with higher levels ofconcentration, especially between 20% and 50%, consistent with decreasingagency costs as the controlling shareholders wealth invested in the acquiring

firm increases.


13/20

Yen & Andr

229


14/20

Yen & Andr

230

This evidence is not only for US family firms in Anderson & Reeb (2003) orbidders from English origin countries in Yen & Andr (2007), but also foracquiring companies from emerging markets in this study.

Looking at a broad set of governance variables, board composition has

significant impact on firm performance for acquiring firms in emergingmarkets. First, board size (B_Size) positively relates to post performance.This result indicates larger boards are more likely to include various experts tocompensate for managers weakness (Agrawal & Chadha, 2005), butcontradicts the potential inefficiency of larger boards suggested in priorliterature (Jensen, 1993; Yermack, 1996; Conyon and Peck, 1998).

Second, this study questions the effectiveness of an audit committee(B_Audi t) according to the results. Earlier researchers have had similarconcerns whether intense scrutiny surpasses the potential contribution ofaudit committees (Turpin & DeZoort, 1998; Turley & Zaman, 2004) and lack of

expertise and experience in making important investment decisions (Hatherly,1999; Cohen, Krishnamoorthy & Wright, 2002). Third, the proportion ofindependent (non-executive) directors on the board (INDDIR) has a positiveassociation with post acquisition performance similar to a number of studies(Fama & Jensen, 1983; Rosenstein & Wyatt, 1990). Other variables such asseparation, CEO position (CEO duality and related CEO), or other block-holders are not significant in explaining long-term M&A performance.

Concerning legal variables, this work validated that companies in countrieswith a higher score of anti-director right do better performance (Johnson,Boone, Breach & Friedman, 2000; Nenova, 2003) and too strong legalenforcement is negatively related to post acquisition performance. However,the results of these two legal indexes are not statistically significant.Moreover, this study found that the quality of accounting standards(ACCOUNT) is significantly positive associated with good M&A decisions forall model specifications. This study did not find any important link betweenlong-term acquisition performance and the Dyck-Zingales (2004) extra-legalindex.

Regarding deal characteristics, the entirely equity-financed M&As (Pay_Share)significantly under-performed in the long run. Confirming the signal effect of payment

methods (Loughran & Vijh, 1997; Andr et al., 2004; Faccio & Masulis, 2005).The toehold interests (Toehold) have slightly negative effects on post-adjusted performance at the 10 percent significance level. This resultchallenges the argument that pre-merger equity interests help bidders shareholders toretain acquisition benefits (Franks & Harris,1989; Sudarsanam, Holl & Salami,1996).The presence of multiple bidders (Compete) has a significant positive impacton acquiring performance. Similar to the view of Capron & Pistre (2002), thispositive competition effect provides a valuable point that if acquirers control uniqueresources, similar to most acquiring firms in emerging markets, they still can expect to earnabnormal returns. In addition, the larger bid premium (Prem_4w) triggers a more negativeacquiring performance (Goergen & Renneboog, 2004; Healy, Palepu & Ruback,1997) and

acquirers with a higher leverage ratio (LEV) will motivate managers toundertake value-enhancing M&A projects (Stulz, 1990; Maloney, McCormick& Mitchell, 1993). Other variables such as targets legal origin, cross border,


15/20

Yen & Andr

231

transaction attitude, industry relatedness, and size effect do not havesignificant impact in explaining the operating performance of acquiring firms inemerging markets.


16/20

Yen & Andr

232

5. Conclusions and Limitation

This paper determines the effects of ownership structure, governancemechanisms, and legal systems on long term operating performance of acquiringfirms in emerging countries. The findings suggest a role for controlling shareholders

(especially holding ownership between 25%-30%) in improving post acquisition operatingperformance over three years after transaction. Findings show no significant differences

between acquiring firms with and without separation of ownership and voting rights.Among firm-level corporate governance mechanisms, boar composition indexes are strongerrelated to post acquisition performance than those of CEO position and block-holders. For

country-level legal systems, value-creating deals associate with higher qualityaccounting standards and superior investor protection of emerging markets.

Like most accounting-based performance literature, to examine the long termoperating performance, this study was confined by the pre-2004 deal samplesthose accounting numbers are available for three years after M&A deals. The

further study should consider post-2004 data to see the validity of the findings.

References

Agrawal, A. & Chadha, S. 2005, 'Corporate Governance and AccountingScandals'. Journal of Law and Economics, vol. 48, pp. 371-405.

Agrawal, A., Jaffe, J. F. & Mandelker, G. N. 1992, 'The Post-MergerPerformance of Acquiring Firms: A Re-examination of An Anomaly'.Journal of Finance, vol. 47, no. 4, pp. 1605-1621.

Anderson, R. C. & Reeb, D. M. 2003, 'Founding-Family Ownership and FirmPerformance: Evidence from the S&P 500'. Journal of Finance, vol. 58,

no. 3, pp. 1301-1329.Andr, P., Kooli, M. & L'Her, J.-F. 2004, 'The Long-run Performance of

Mergers and Acquisitions: Evidence from the Canadian Stock Market'.Financial Management, vol. 33, no. 4, pp. 27-43.

Bae, K. H., Kang, J. K. & Kim, J. M. 2002, 'Tunneling or Value Added?Evidence from Mergers by Korean Business Groups'. Journal ofFinance, vol. 57, no. 6, pp. 2695-2740.

Barth, E., Gulbrandsen, T. & Schonea, P. 2005, 'Family Ownership andProductivity: The Role of Owner-management'. Journal of CorporateFinance, vol. 11, no. 1/2, pp. 107-127.

Becht, M. & Roell, A. 1999, 'Blockholding in Europe: An internationalcomparison'. European Economic Review, vol. 43, no. 4-6, pp. 1049-1056.

Ben-Amar, W. & Andr, P. 2006, 'Separation of Ownership from Control andAcquiring Firm Performance: The Case of Family Ownership in Canada'.Journal of Business Finance & Accounting, vol. 33, no. 3/4, pp. 517-543.

Brickley, J. A., Coles, J. L. & Jarrell, G. 1997, 'Leadership Structure:Separating the CEO and Chairman of the Board'. Journal of CorporateFinance, vol. 3, no. 3, pp. 189-220.

Bris, A. & Cabolis, C. 2002, 'Corporate Governance Convergence by Contract:Evidence from Cross-border Mergers'. Yale ICF Working Paper.

Campa, J. M. & Hernando, I. 2004, 'Shareholder Value Creation in EuropeanM&As'. European Financial Management, vol. 10, no. 1, pp. 47-81.


17/20

Yen & Andr

233

Capron, L. & Pistre, N. 2002, 'When do Acquirers Earn Abnormal Returns?'Strategic Management Journal, vol. 23, pp. 781-794.

Carline, N. F., Linn, S. C. & Yadav, P. K. 2002, 'The Influence of ManagerialOwnership on the Real Gains in Corporate Mergers and MarketRevaluation of Merger Partners: Empirical Evidence'. Working Paper

Chari, A., Ouimet, P. P. & Tesar, L. L. 2004, 'Acquiring Control in EmergingMarkets: Evidence from the Stock Market'. NBER.

Claessens, S., Djankov, S., Fan, J. P. H. & Lang, L. H. P. 2002, 'Disentanglingthe Incentive and Entrenchment Effects of Large Shareholdings'. Journalof Finance, vol. 57, no. 6, pp. 2741-2771.

Claessens, S., Djankov, S. & Lang, L. H. P. 2000, 'The Separation ofOwnership and Control in East Asian Corporations'. Journal of FinancialEconomics, vol. 58, no. 1/2, pp. 81-112.

Cohen, J., Krishnamoorthy, G. & Wright, A. M. 2002, 'Corporate Governanceand the Audit Process'. Contemporary Accounting Research, vol. 19, no.4, pp. 573-594.

Conyon, M. J. & Murphy, K. (Eds.) (2002) Stock Based ExecutiveCompensation, Oxford University Press.

Cronqvist, H. & Nilsson, M. 2003, 'Agency Costs of Controlling MinorityShareholders'. Journal of Financial and Quantitative Analysis, vol. 38,no. 4, pp. 695-719.

Demsetz, H. & Lehn, K. 1985, 'The Structure of Corporate Ownership: Causesand Consequences'. Journal of Political Economy, vol. 93, no. 6, pp.1155-1177.

Denis, D. J. & Denis, D. K. 1995, 'Performance Changes Following TopManagement Dismissals'. Journal of Finance, vol. 50, no. 4, pp. 1029-1057.

Dyck, A. & Zingales, L. 2004, 'Private Benefits of Control: An InternationalComparison'. Journal of Finance, vol. 59, no. 2, pp. 537-600.

Esty, B. C. & Megginson, W. L. 2003, 'Creditor Rights, Enforcement, and DebtOwnership Structure: Evidence from the Global Syndicated LoanMarket'. Journal of Financial and Quantitative Analysis, vol. 38, no. 1, pp.37-59.

Faccio, M. & Lang, L. H. P. 2002, 'The Ultimate Ownership of WesternEuropean Corporations'. Journal of Financial Economics, vol. 65, no. 3,pp. 365-395.

Faccio, M., Lang, L. H. P. & Young, L. 2001, 'Dividends and Expropriation'.

American Economic Review, vol. 91, no. 1, pp. 54-78.Faccio, M. & Masulis, R. W. 2005, 'The Choice of Payment Method inEuropean Mergers and Acquisitions'. Journal of Finance, vol. 60, no. 3,pp. 1345-1388.

Faccio, M. & Stolin, D. 2006, 'Expropriation vs. Proportional Sharing inCorporate Acquisitions'. Journal of Business, vol. 79 no. 3, pp. 1413-1444.

Fama, E. F. & Jensen, M. C. 1983, 'Separation of Ownership and Control'.Journal of Law & Economics, vol. 26, no. 2, pp. 301-326.

Fauver, L., Houston, J. & Naranjo, A. 2003, 'Capital Market Development,International Integration, Legal System, and the Value of Corporate

Diversification: A Cross-country Analysis'. Journal of Financial andQuantitative Analysis, vol. 38, no. 1, pp. 135-157.


18/20

Yen & Andr

234

Franks, J. R. & Harris, R. S. 1989, 'Shareholder Wealth Effects of CorporateTakeovers: The U.K. Experience 1955-1985'. Journal of FinancialEconomics, vol. 23, no. 2, pp. 225-249.

Ghosh, A. 2001, 'Does Operating Performance Really Improve followingCorporate Acquisitions?' Journal of Corporate Finance, vol. 7, no. 2, pp.

151-178.Goergen, M. & Renneboog, L. 2004, 'Shareholder Wealth Effects of European

Domestic and Cross-border Takeover Bids'. European FinancialManagement, vol. 10, no. 1, pp. 9-45.

Hatherly, D. 1999, 'The Future of Auditing: The Debate in the UK'. EuropeanAccounting Reviewvol. 8, no. 1, pp. 51-65.

Healy, P. M., Palepu, K. G. & Ruback, R. S. 1992, 'Does CorporatePerformance Improve after Mergers?' Journal of Financial Economics,vol. 31, no. 2, pp. 135-175.

Healy, P. M., Palepu, K. G. & Ruback, R. S. 1997, 'Which Takeovers AreProfitable? Strategic or Financial?' Sloan Management Review, vol. 38,

no. 4, pp. 45-58.Hitt, M., Harrison, J. R., Ireland, R. D. & Best, A. 1998, 'Attributes of

Successful and Unsuccessful Acquisition of U.S. Firms'. British Journalof Management, vol. 9, no. 2, pp. 91-114.

Holmen, M. & Knopf, J. D. 2004, 'Minority Shareholder Protections and thePrivate Benefits of Control for Swedish Mergers'. Journal of Financialand Quantitative Analysis, vol. 39, no. 1, pp. 167-191.

Jensen, M. C. & Meckling, W. H. 1976, 'Theory of the Firm: ManagerialBehavior, Agency Costs and Ownership Structure'. Journal of FinancialEconomics, vol. 3, no. 4, pp. 305-360.

Johnson, S., Boone, P., Breach, A. & Friedman, E. 2000, 'CorporateGovernance in the Asian Financial Crisis'. Journal of FinancialEconomics, vol. 58, no. 1/2, pp. 141-186.

La Porta, R., Lopez-de-Silanes, F. & Shleifer, A. 1999, 'Corporate OwnershipAround the World'. Journal of Finance, vol. 54, no. 2, pp. 471-517.

La Porta, R., Lopez-de-Silanes, F., Shleifer, A. & Vishny, R. W. 1998, 'Law andFinance'. Journal of Political Economy, vol. 106, no. 6, pp. 1113-1155.

La Porta, R., Lopez-de-Silanes, F., Shleifer, A. & Vishny, R. W. 2002, 'InvestorProtection and Corporate Valuation'. Journal of Finance, vol. 57, no. 3,pp. 1147-1170.

Lewellen, W. G., Loderer, C. & Rosenfeld, A. 1985, 'Merger Decisions and

Executive Stock Ownership in Acquiring Firms.' Journal of Accounting &Economics, vol. 7, no. 1/2/3, pp. 209-232.Limmack, R. J. & McGregor, N. 1995, 'Industrial Relatedness, Structural

Factors and Bidder Returns'.Applied Financial Economics, vol. 5, no. 3,pp. 179-191.

Linn, S. C. & Switzer, J. A. 2001, 'Are Cash Acquisitions Associated withBetter Post-combination Operating Performance than StockAcquisitions?' Journal of Banking and Finance, vol. 25, no. 6, pp. 1113-1138.

Loughran, T. & Ritter, J. R. 1997, 'The Operating Performance of FirmsConducting Seasoned Equity Offerings'. Journal of Finance, vol. 52, no.

5, pp. 1823-1850.Loughran, T. & Vijh, A. M. 1997, 'Do Long-term Shareholders Benefit from


19/20

Yen & Andr

235

Corporate Acquisitions?' Journal of Finance, vol. 52, no. 5, pp. 1765-1790.

Maloney, M. T., McCormick, R. E. & Mitchell, M. L. 1993, 'Managerial DecisionMaking and Capital Structure'. Journal of Business, vol. 66, no. 2, pp.189-217.

Maury, B. 2005, 'Family Ownership and Firm Performance: EmpiricalEvidence from Western European Corporations'. Journal of CorporateFinance, vol. 12, no. 2, pp. 321-341.

Maury, B. & Pajuste, A. 2005, 'Multiple Large Shareholders and Firm Value'.Journal of Banking and Finance, vol. 29, no. 7, pp. 1813-1834.

McConaughy, D. L., Walker, M. C., Henderson, J. G. V. & Mishra, C. S. 1998,'Founding Family Controlled Firms: Efficient and Value'. Review ofFinancial Economics, vol. 7, no. 1, pp. 1-19.

McConnell, J. J. & Servaes, H. 1990, 'Additional Evidence on EquityOwnership and Corporate Value'. Journal of Financial Economics, vol.27, no. 2, pp. 595-612.

Michael, G., Emmanuel, M. & Alfred, Y. 2008, 'Acquisitions from UK firms intoemerging markets'. Global Finance Journal, vol. 19, no. 1, pp. 56.

Moeller, S. B. & Schlingemann, F. P. 2005, 'Global Diversification and BidderGains: A Comparison between Cross-border and Domestic Acquisitions'.Journal of Banking and Finance, vol. 29, pp. 533-564.

Morck, R., Shleifer, A. & Vishny, R. W. 1988, 'Management Ownership andMarket Valuation: An Empirical Analysis'. Journal of FinancialEconomics, vol. 20, no. 1/2, pp. 293-315.

Nenova, T. 2003, 'The Value of Corporate Voting Rights and Control: A Cross-country Analysis'. Journal of Financial Economics, vol. 68, no. 3, pp.325-351.

Powell, R. G. & Stark, A. W. 2005, 'Does Operating Performance IncreasePost-takeover for UK Takeovers? A Comparison of PerformanceMeasures and Benchmarks'. Journal of Corporate Finance, vol. 11, no.1/2, pp. 293-317.

Rahman, R. A. & Limmack, R. J. 2004, 'Corporate Acquisitions and theOperating Performance of Malaysian Companies'. Journal of BusinessFinance & Accounting, vol. 31, no. 3/4, pp. 359-400.

Rosenstein, S. & Wyatt, J. G. 1990, 'Outside Directors, Board Independence,and Shareholder Wealth'. Journal of Financial Economics, vol. 26, no. 2,pp. 175-191.

Sharma, D. S. & Ho, J. 2002, 'The Impact of Acquisitions on OperatingPerformance: Some Australian Evidence'. Journal of Business Finance &Accounting, vol. 29, no. 1/2, pp. 155-200.

Shleifer, A. & Vishny, R. W. 1986, 'Large Shareholders and Corporate Control'.Journal of Political Economy, vol. 94, no. 3, pp. 461-489.

Stulz, R. M. 1990, 'Managerial Discretion and Optimal Financing Policies'.Journal of Financial Economics vol. 26, no. 1, pp. 3-27.

Sudarsanam, P. S., Holl, P. & Salami, A. 1996, 'Shareholder Wealth Gains inMergers: Effect of Synergy and Ownership Structure'. Journal ofBusiness Finance & Accounting, vol. 23, no. 5/6, pp. 673-698.

Turley, S. & Zaman, M. 2004, 'The Corporate Governance Effects of Audit

Committees'. Journal of Management and Governance, vol. 8, no. 3, pp.305-332.


20/20

Yen & Andr

236

Turpin, R. A. & DeZoort, F. T. 1998, 'Characteristics of Firms that Include anAudit Committee Report in their Annual Report'. International Journal ofAuditing, vol. 2, pp. 35-48.

Vefeas, N. & Theodorou, E. 1998, 'The Relationship between Board Structureand Firm Performance in the UK'. British Accounting Review, vol. 30, no.

4, pp. 383-407.Weisbach, M. S. 1988, 'Outside Directors and CEO Turnover'. Journal of

Financial Economics, vol. 20, pp. 431-460.Yen, T.-Y. & Andr, P. 2007, 'Ownership structure and operating performance

of acquiring firms: The case of English-origin countries'. Journal ofEconomics and Business vol. 59, pp. 380-405.

Documents

strukturhargariklantelevisisebuah jurnal.pdf