Does the Market for Corporate Control Influence Executive Risk-Taking Incentives? Evidence From Takeover Vulnerability

2020 ◽  
Author(s):  
Viput Ongsakul ◽  
Pattanaporn Chatjuthamard ◽  
Napatsorn (Pom) Jiraporn ◽  
Pornsit Jiraporn
Keyword(s):  
Risk Taking ◽  
Corporate Control ◽  
Market For Corporate Control

Does the market for corporate control influence executive risk-taking incentives? Evidence from takeover vulnerability

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Viput Ongsakul ◽  
Pattanaporn Chatjuthamard ◽  
Napatsorn Jiraporn ◽  
Pornsit Jiraporn
Keyword(s):  
Risk Taking ◽  
Fixed Effects ◽  
Corporate Control ◽  
Governance Mechanism ◽  
Causal Inferences ◽  
Content Type ◽  
Instrumental Variable Analysis ◽  
Market For Corporate Control ◽  
External Governance ◽  
Takeover Market

Purpose This study aims to investigate the role of the market for corporate control as an external governance mechanism and its effect on executive risk-taking incentives. Managers tend to be risk-averse as they are more exposed to idiosyncratic risk, resulting in sub-optimal risk-taking that does not maximize shareholders’ wealth. The takeover market alleviates this problem, inducing managers to take more risk. Therefore, risk-taking incentives inside the firm are less powerful when the outside takeover market is more active. Design/methodology/approach Exploiting a novel measure of takeover vulnerability recently constructed by Cain et al. (2017), the authors explore how takeover vulnerability influences executive risk-taking incentives. Using a large sample of US firms, the authors use fixed-effects regressions, propensity score matching and instrumental variable analysis. Findings Consistent with this study’s hypothesis, a more active takeover market results in less powerful risk-taking incentives. Specifically, a rise in takeover vulnerability by one standard deviation diminishes executive risk-taking incentives by 22.39%, which is an economically meaningful magnitude. Originality/value To the best of the authors’ knowledge, this study is the first to explore the effect of the takeover market on managerial risk-taking incentives, using a novel measure of takeover susceptibility. The authors’ measure of takeover vulnerability is considerably less susceptible to endogeneity, enabling the authors to draw causal inferences with more confidence.

International M&A Laws, the Market for Corporate Control and Risk-taking

2021 ◽  
Author(s):  
Santosh Koirala ◽  
Sandeep Rao ◽  
Hisham Farag ◽  
Andrew P. Marshall
Keyword(s):  
Risk Taking ◽  
Corporate Control ◽  
Market For Corporate Control

Raiders Activity on the Market for Corporate Control as a Product of Coercive Entrepreneurship Evolution

2007 ◽  
pp. 80-92
Author(s):  
A. Kireev
Keyword(s):  
Corporate Control ◽  
Role Of Government ◽  
Market For Corporate Control ◽  
Basic Characteristics

The paper studies the problem of raiders activity on the market for corporate control. This activity is considered as a product of coercive entrepreneurship evolution. Their similarities and sharp distinctions are shown. The article presents the classification of raiders activity, discribes its basic characteristics and tendencies, defines the role of government in the process of its transformation.

The Value of SOX 404 in the Market for Corporate Control

2009 ◽  
Author(s):  
Masako N. Darrough ◽  
Rong Huang ◽  
Emanuel Zur
Keyword(s):  
Corporate Control ◽  
Market For Corporate Control
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