Corporate Governance and The Abnormal Returns To Acquisition Announcements

Abstract

This paper investigates the relationship between a firm's corporate governance
structure and the abnormal returns associated with acquisition announcements.
Based on a sample of 294 acquisitions occurring from 1994 through 1998, it is
found that acquiring firms have significant two-day abnormal returns of-2.71%.
A multiple regression model that includes corporate governance variables has an
Adjusted R-squared of 14.2% with board size, the sensitivity of the CEO's wealth
to changes in share price, method ofpayment, and acquiring firm size all being
significant explanatory variables.