Target firm takeovers and corporate governance: Evidence from BRICS

Abstract

The study analyses the role of various corporate governance mechanisms in the takeovers of target firms in BRICS countries. Based on a sample of 837 M&A deals that occurred between 2010 and 2022, the results show that corporate governance mechanisms significantly influence both the likelihood of takeover and M&A performance. Board attributes such as size, independence and gender diversity have a favourable impact on the likelihood of takeover completion as well as performance. Among ownership attributes, activist institutional investors such as sovereign wealth and hedge funds and private equity/venture capitalists have a consistent and strong influence on both takeover completion success and performance. While other investors such as mutual and pension funds and insurance firms do not seem to have a strong relationship. Lastly, Environmental, Social & Governance (ESG)-linked CEO compensation is strongly related to both takeover completion likelihood and performance.