The effects of family control, blockholder activism, board structures and deal characteristics on acquisition performance

This study examines the announcement effects and long-run stock performance for acquirers from years 2000 to 2013. Since acquisitions create agency problem and companies in Malaysia exhibit concentrated ownership structures, this study aims to investigate four major objectives which consist of the effects of family control, blockholder activism, board structures and deal characteristics on stock performance of acquirers. In addressing these objectives, abnormal returns from three-day before through one-day after the announcements as well as abnormal returns over a 36-months period are adopted as the proxy for the announcement effects and long-run stock performance respectively. Ordinary least squares regression methods are used to examine the effects of the 16 factors on abnormal returns. The results show that acquisitions in Malaysia are value-enhancing, which is consistent with synergistic theory. Furthermore, family ownership and active institutional blockholders are able to create value which implies that family-controlled firms do not engage in opportunistic behaviour. However, passive institutional blockholders and fairness opinion lead to lower value which indicates that these factors are unable to mitigate conflict of interest between majority and minority shareholders. As for the long run performance, Malaysia market can be considered as efficient, as most of the analyses show that the performance of acquirers do not differ from those of the matching firms. The findings imply that managers of family-controlled firms do not have to worry about investors penalizing them, as long as they engage in valuecreating acquisitions. Moreover, institutional blockholders should play an active role if they want to protect their investments. Finally, investors have to realize that over the long run, there is no trading strategy that could be adopted to earn abnormal profit.