Is there a Dark Side to Monitoring? Board and Shareholder Monitoring Effects on M&A Performance Extremeness

• 成果类型: Article
• 署名作者: Goranova, Maria L.; Priem, Richard L.; Ndofor, Hermann A.; Trahms, Cheryl A.
• 署名单位: University of Wisconsin System; University of Wisconsin Milwaukee; Texas Christian University; Indiana University System; Indiana University Indianapolis; IU Kelley School of Business; Minnesota State Colleges & Universities; Minnesota State University Mankato
• 刊物名称: STRATEGIC MANAGEMENT JOURNAL
• ISSN/ISSBN: 0143-2095
• DOI: 10.1002/smj.2648
• 发表日期: 2017
• 页码: 2285-2297
• 关键词: CORPORATE GOVERNANCE; M&A performance extremeness; monitoring; Board of directors; institutional shareholders

摘要

Research summary: We investigate the effects of monitoring by boards of directors and institutional shareholders on merger and acquisition (M&A) performance extremeness using a sample of M&A deals from 1997 to 2006. Both governance research and legal reforms generally have espoused a raise all boats view of monitoring. We instead investigate whether monitoring may serve as a double-edged sword that limits CEO discretion to undertake both value-destroying M&A deals and value-creating ones. Our findings indicate that the relationship between monitoring and M&A performance is more complex than previously believed. Rather than raising all boats in a shift towards better M&A outcomes, monitoring instead is associated with lower M&A losses, but also with lower M&A gains. Managerial summary: Mergers and acquisitions (M&As) are a quintessential corporate activity. There were $3.8trillion worth of M&A deals in 2015, despite scholars and practitioners reporting that M&As often perform poorly. We question the widespread belief that more vigilant monitoring by boards of directors and large shareholders will raise M&A performance, overall. Put differently, does monitoring constrain CEOs' discretion to pursue bad deals, while simultaneously encouraging them to pursue good ones? We find that monitoring limits both large M&A losses and large M&A gains. Contrary to widely held beliefs, our results indicate that constraining executives' ability to pursue value-destroying M&A deals does not simultaneously encourage or enable CEOs to pursue value-creating deals. Copyright (c) 2017 John Wiley & Sons, Ltd.