Abstract

This Paper investigate the relationships between two of the main corporate governance components namely the Anti-Takeover Provisions (ATPs) as external component and Ownership Concentration as internal component and the short/long term performance of the Nikkei-listed Japanese cross-border acquirers during the last decade specifically from 2004 to the end of 2013. Market based metrics which is cumulative abnormal returns (CARs) were used to represent the short term performance and accounting based metric which is Return of Assets (ROA) were used to represent the long term performance. Based on 222 events, a quantitative method of events, study and regression analysis were employed to reveal the relationships. The study found a negative, weak and statistically not significant relationship between the ATPs and short/long term performance. The study also revealed that the relationship between ownership concentration and short/long term performance is almost negligible. These findings imply that the newly adopted corporate governance mechanism in Japan is still not as effective as in the other developed markets such as USA and might need more time to reap tangible results.

Highlights

  • The burst of Japan’s massive financial bubble in 1990 caused the value of stocks, land and other assets to plummet

  • Independent variables are (ATPINDEX) the index for anti-takeover provisions. (DEALSIZE) the relative deal size. (FCF) the free cash flow, (MARKVAL) the market value of equity, (TOP5OW) the aggregate ownership percentage of top5 owners. (M/B) market to book ratio. (FIRMSIZE) the firm size and (LEVG) the leverage measured at announcement day

  • The results show that the Anti-Takeover Provisions (ATPs) as external corporate governance mechanism has negative but statistically non-significant effect on the short term performance of the acquirer represented by the two indicators, cumulative abnormal returns with 2 days before and after the acquisitions day (CAR2) and 5 days before and after the acquisitions day (CAR5)

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Summary

Introduction

The burst of Japan’s massive financial bubble in 1990 caused the value of stocks, land and other assets to plummet. Many banks failed due to a combination of the collapse of asset values and their clients’ inability to pay back loans. Japanese manufacturers lost their traditional source of financing, bank loans. The last decade witnessed another notable phenomenon for Japanese firms which is the dramatic increase of Cross-Border Merger and Acquisitions (M&As) fueled by several factors like: domestic market decline, high cost of local labor, globalization among others. All these factors are encouraging Japanese companies to consider entering overseas markets. The aim of this paper is to dig into these two remarkable changes happening to Japanese firms in the last decade by investigating the following:

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