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How do industry peers respond to control threats?

Servaes, Henri and Tamayo, Ane ORCID: 0000-0001-7154-0221 (2014) How do industry peers respond to control threats? Management Science, 60 (2). pp. 380-399. ISSN 0025-1909

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Identification Number: 10.1287/mnsc.2013.1773

Abstract

This paper studies how industry peers respond when another firm in the industry is the subject of a hostile takeover attempt. The industry peers cut their capital spending, free cash flows, and cash holdings, and increase their leverage and payouts to shareholders. They also adopt more takeover defenses. The stock price reaction upon announcement of the takeover is positive and larger for peer firms with higher capital spending and higher free cash flows. Before the takeover attempt, the peer firms borrow less and invest more than predicted. Both stock returns and performance improve after the takeover attempt. These results are consistent with the argument that the control threat has important spillover effects for the other firms in the industry.

Item Type: Article
Official URL: https://www.informs.org/Find-Research-Publications...
Additional Information: © 2014 INFORMS
Divisions: Accounting
Subjects: H Social Sciences > HC Economic History and Conditions
Date Deposited: 12 Mar 2014 08:40
Last Modified: 20 Oct 2021 02:09
Funders: Research and Materials Development Fund at London Business School
URI: http://eprints.lse.ac.uk/id/eprint/56055

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