TY - JOUR
T1 - Viceroys or Emperors? An Institution-Based Perspective on Merger and Acquisition Prevalence and Shareholder Value
AU - Maas, A. J.J.(Ron)
AU - Heugens, P. P.M.A.R.(Pursey)
AU - Reus, Taco H.
PY - 2019/1/1
Y1 - 2019/1/1
N2 - We study how cross-country variance in institutions that aim to address core agency problems influences consequential strategic decisions of firms around the world. Scholars frequently argue that the interests of minority shareholders are threatened by merger and acquisitions (M&As) due to principal-agency problems. Rather than acting in shareholders’ best interests, managers potentially act as viceroys, using M&As to cushion themselves from risk and extract more pay. Yet equally salient is the issue of principal-principal agency, where controlling shareholders can behave as emperors who use M&As to siphon off assets and profits, and appropriate wealth of shareholders with fewer control rights. Taking an institution-based perspective on these ‘viceroy’ and ‘emperor’ problems, we conjecture that institutions aimed to address these agency problems can generate the desired outcome regarding M&A prevalence, but may also produce unintentional negative consequences for shareholder value as a side-effect. Empirical evidence covering M&As from 73 countries supports our hypotheses.
AB - We study how cross-country variance in institutions that aim to address core agency problems influences consequential strategic decisions of firms around the world. Scholars frequently argue that the interests of minority shareholders are threatened by merger and acquisitions (M&As) due to principal-agency problems. Rather than acting in shareholders’ best interests, managers potentially act as viceroys, using M&As to cushion themselves from risk and extract more pay. Yet equally salient is the issue of principal-principal agency, where controlling shareholders can behave as emperors who use M&As to siphon off assets and profits, and appropriate wealth of shareholders with fewer control rights. Taking an institution-based perspective on these ‘viceroy’ and ‘emperor’ problems, we conjecture that institutions aimed to address these agency problems can generate the desired outcome regarding M&A prevalence, but may also produce unintentional negative consequences for shareholder value as a side-effect. Empirical evidence covering M&As from 73 countries supports our hypotheses.
KW - comparative institutional research
KW - institution-based view
KW - mergers and acquisitions
KW - meta-analytic regression analysis
KW - principal-agency theory
KW - principal-principal agency theory
UR - http://www.scopus.com/inward/record.url?scp=85044286917&partnerID=8YFLogxK
U2 - 10.1111/joms.12335
DO - 10.1111/joms.12335
M3 - Article
AN - SCOPUS:85044286917
SN - 0022-2380
VL - 56
SP - 234
EP - 269
JO - Journal of Management Studies
JF - Journal of Management Studies
IS - 1
ER -