Managers

Does Takeover Activity Cause Managerial Discipline? Evidence from International M&A Laws

Ugur Lel (University of Georgia), Darius P. Miller (SMU)

This paper exploits the staggered initiation of takeover laws across countries to examine whether the threat of takeover enhances managerial discipline. We show that following the passage of takeover laws (1) poorly performing firms experience more frequent takeovers; (2) the propensity to replace poorly performing CEOs increases, especially in countries with weak investor protection; and (3) directors of targeted firms are more likely to lose board seats following corporate control events.