The effect of international takeover laws on corporate resource adjustments: Market discipline and/or managerial myopia?

• 成果类型: Article
• 署名作者: Cannon, James N.; Hu, Bingbing; Lee, Jay Junghun; Yang, Daoguang
• 署名单位: Utah System of Higher Education; Utah State University; Hong Kong Baptist University; University of Massachusetts System; University of Massachusetts Boston; University of International Business & Economics
• 刊物名称: JOURNAL OF INTERNATIONAL BUSINESS STUDIES
• ISSN/ISSBN: 0047-2506
• DOI: 10.1057/s41267-020-00370-6
• 发表日期: 2020
• 页码: 1443-1477
• 关键词: takeover laws; resource adjustments; MARKET DISCIPLINE; Managerial myopia; short-termism; cost asymmetry

摘要

Practitioners often claim that takeover pressure induces managerial myopia (short-termism), but academic research provides limited empirical evidence supporting this assertion. Our study fills this void by investigating how takeover threat influences managers' resource-adjustment decisions. Specifically, we exploit the staggered enactments of merger and acquisition laws across countries as exogenous shocks that facilitate takeover transactions and increase takeover threat. While we find some evidence that takeover laws deter managers from acquiring and retaining excess resources (market discipline), we find more prevailing evidence that such law enactments induce managers to pursue short-term profits through underinvesting in resources meant to create long-term value (managerial myopia). Cross-country analyses reveal that the effect of takeover legislation on resource adjustments is concentrated in countries with weak investor protection and in countries with short-term-oriented culture. Consistent with managerial myopia, we also find that corporate resources contribute less to the long-term value in the post-enactment period, and that firm profitability improves immediately after the enactment, but then gradually reverts to the pre-enactment level. Collectively, our evidence suggests that policymakers, corporate boards, investors, and researchers, when assessing the net effects of takeover threats, should consider both the downside of inciting myopic behavior and the upside of tightening managerial discipline.