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- PublicationMeasuring the effectiveness of Australia's Statutory-backed continuous disclosure policy on 'innovative' investment disclosuresWe examine the impact of the introduction in 1994 (and subsequent amendments) of the statutory-backed continuous disclosure policy (SBCDP) in Australia. Our analysis measures impact by focusing on the investment disclosure propensity, and investment announcement abnormal returns of more innovative investments, defined as disclosures of R&D and IT expenditures. We also examine CAPEX investment disclosures as a benchmark in which to compare R&D and IT disclosures. Using regression models to control for typical characteristics (i.e., firm, industry, macroeconomic and time) that are correlated with investment likelihood, we find that post SBCDP adoption in 1994, firms were less likely to disclose any investment type. We do, however, find a significant increase in disclosure likelihood after the adoption in 2003 of stronger non-disclosure legislation, and tougher penalties. Nevertheless, compared to CAPEX disclosures, firms are still less likely to disclose R&D investments, even after the adoption of tougher penalties in 2003. We interpret this finding as evidence of firms unwilling to forego competitive advantages, which likely arise with R&D investments. We also find some evidence of increased announcement returns post SBCDP adoption, but only for CAPEX investments. The abnormal returns to R&D investments appear to be uncorrelated with changes in regulation, and remain fairly constant over the sample period.
- PublicationThe sources of value destruction in acquisitions by entrenched managersPrior work has established that entrenched managers make value-decreasing acquisitions. In this study, we determine how they destroy that value. Overall, we find that value destruction by entrenched managers comes from a combination of factors. First, they disproportionately avoid private targets, which have been shown to be generally associated with value creation. Second, when they do buy private targets or public targets with blockholders, they tend not to use all-equity offers, which has the effect of avoiding the transfer of a valuable blockholder to the bidder. We further test whether entrenched managers simply overpay for good targets or choose targets with lower synergies. We find that while they overpay, they also choose low synergy targets in the first place, as shown by combined announcement returns and post-merger operating performance.
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