Corporate governance, corporate control and takeovers

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Advances in Mergers & Acquisitions

ISSN: 1479-361X
Series editor(s): Sydney Finkelstein and Cary Cooper

Subject Area: Strategy

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Document Information:
Title:	Corporate governance, corporate control and takeovers
Author(s):	Sudi Sudarsanam
Volume:	1 ISBN: 978-0-76230-683-1 eISBN: 978-1-84950-061-6
Citation:	Sudi Sudarsanam (2000), Corporate governance, corporate control and takeovers, in (ed.) 1 (Advances in Mergers & Acquisitions, Volume 1), Emerald Group Publishing Limited, pp.119-155
DOI:	10.1016/S1479-361X(00)01006-1 (Permanent URL)
Publisher:	Emerald Group Publishing Limited
Article type:	Full length article
Abstract:	There are a variety of monitoring and control mechanisms to resolve the agency conflict between shareholders and their agents, the managers. Given the centrality of the shareholder wealth maximisation goal in corporate finance, the function of these mechanisms is to ensure that managers pursue that goal. These mechanisms include: an independent board, outside block shareholdings including institutional shareholders, managerial ownership and incentives, lenders, the managerial labour market and the market for corporate control. We explore the inter-dependency of these control mechanisms and whether and how they complement, or substitute for, one another. The role of the market for corporate control, including proxy contests and outright takeovers, in resolving agency conflicts, the impediments to takeovers and their effectiveness are reviewed. We seek to explain the well-documented failure of acquirers to create value, in terms of the ineffectiveness of the corporate governance system in acquiring companies.