The role of the bidding process in the corporate governance of bidding firms : the case of abandoned acquisitions

• Main Author: McCann, M.
• Published: Nottingham Trent University 2013
• Subjects: 658
• Online Access: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.629321

This thesis is structured around an empirical investigation of the experience of bidding firms in abandoned acquisitions. Existing research suggests that, in certain circumstances, abandoned acquisitions may play a governance role, disciplining bidder managers for proposing acquisitions which reduce shareholder wealth. However, there has been little work analysing how, and in what circumstances, abandoned acquisitions perform this governance role. This research addresses this gap, by investigating the causal mechanisms of abandoned acquisitions and their aftermath. The thesis develops an innovative, multi-dimensional conceptual framework, blending existing theories of acquisitions and corporate governance. This framework guides the empirical investigation, which uses the causal process tracing (CPT) method, not previously adopted in this field. The work builds cumulatively, to analyse the causal mechanisms, in cases of abandoned acquisitions, involving UK bidding firms. To enhance the identification of the nature of the impact of abandonment on bidding firms; disciplinary or otherwise, a different conceptualisation of the post-abandonment experience of bidding firms is adopted. The research builds on this, by selecting distinctive cases; firms with disciplinary experiences and firms with non-disciplinary experiences. CPT is employed to analyse primary and secondary data, revealing the causal mechanisms present in these distinctive cases. As a result, meta-causal mechanisms are proposed. These are particular contingent generalisations, which apply to particular groups of cases. These fine-tune existing theoretical explanations, identifying how, and in what circumstances, variables interact. Disciplinary processes after abandoned acquisitions can be traced to causal mechanisms characterised by strategic uncertainty, raised by information revealed during the bidding process. Conversely, non-disciplinary processes after abandoned acquisitions cannot be traced to the causal mechanisms of abandonment. In these cases, the causal pathology of abandonment is localised. The bidder‟s offer price is too low and acquisitions are abandoned to avoid over-paying. The research implies that more effort should be made to enhance the flow of information in the bidding process. In addition, active monitoring is more nuanced than anticipated. This active monitoring should have a positive effect on acquisition decisions, producing enhanced shareholder wealth.