THE IMPACT OF CORPORATE GOVERNANCE PRACTICES ON POST-MERGER PERFORMANCE

Year 2021, Volume: 8 Issue: 3, 1436 - 1455, 30.11.2021

Ali İhsan Akgün

https://doi.org/10.30798/makuiibf.836627

Cited By: 2

Abstract

The relation between the post-merger performance and corporate governance mechanism is examined using Linear regression model for a sample of US, Canada, EU-28 and Western European countries listed firms for the period from 2003 to 2012. We also examine as to whether the use of International Financial Reporting Standards (IFRS) improves corporate transparency, therefore, increasing financial reporting quality. Using a sample of banks from international countries, we present the following key findings: post-merger performance is significantly better common law in countries than code law in countries with better IFRS group banks during the post-merger performance. We also find that local GAAP reporting allows a more transparent assessment of financial performance on the basis of traditional indicators making it a superior tool for assessing potential acquisition targets. This study analysis changes in a country legal regulation as a measure of corporate governance and shows that these regulations play an important role in merger activity. Legal origins and owner-protection mechanisms are important in explaining the relationship between the quality of accounting standards and corporate governance practices following IFRS adoption. Overall, our empirical findings result consistent with Ciobanu (2015) find that merger and acquisition is influenced both the legal origin and accounting regulations.

Keywords

Corporate governance practices, Post-merger performance, Legal Origin, IFRS

Supporting Institution

The Scientific and Technological Research Council of Turkey (TUBITAK)

Project Number

B.14.2.TBT.0.06.01-219-84

Thanks

-

KURUMSAL YÖNETİM UYGULAMALARININ BİRLEŞME SONRASI PERFORMANSA ETKİSİ

Abstract

Kurumsal yönetim mekanizması ile birleşme sonrası performans arasındaki ilişki, 2003-2012 dönemine ait ABD, Kanada, AB-28 ve Batı Avrupa ülkelerinin borsaya kayıtlı firmalarından oluşan örneklem için Doğrusal Regresyon modeli kullanılarak incelenmiştir. Uluslararası Finansal Raporlama Standartlarının (IFRS) kullanılması kurumsal şeffaflığı ve dolayısıyla finansal raporlamanın da kalitesini artırır. Bu çalışma, uluslararası banka örneklemini kullanarak, aşağıdaki temel bulguları sunmaktadır: Birleşme sonrası bankaların performansı, IFRS grubu bankaların kanun esaslı hukuk sistemini benimseyen ülkelerden daha iyi göstergede olduğunu göstermektedir. Ayrıca, yerel GAAP raporlamasının, geleneksel hukuk sistemini benimseyen göstergeler temelinde finansal performansın daha şeffaf bir şekilde değerlendirilmesine olanak tanıdığını ve potansiyel hedeflerini değerlendirmek için üstün araç olduğunu göstermektedir. Bu çalışmanın bulguları, kurumsal yönetişimin bir ölçüsü olarak bir ülke yasal düzenlemesinde farklılık gösterdiğini ve bu düzenlemelerin birleşme faaliyetinde önemli bir rol oynadığını göstermektedir. Yasal düzenlemeler ve mal sahipliğine yönelik kurumsal yönetim mekanizmaları, IFRS'nin zorunlu uygulamasından sonra muhasebe standartları ile kurumsal yönetim uygulamaları arasındaki ilişkiyi açıklamada önemlidir. Genel olarak, araştırma bulgularımız Ciobanu (2015)’nin sonuçları ile tutarlı olup, birleşme ve devralmanın hem yasal menşei hemde muhasebe düzenlemelerini etkilemiştir

Keywords

IFRS, Kurumsal Yönetim Uygulamaları, Birleşme Sonrası Performans, Yasal Düzenlemeler

Project Number

B.14.2.TBT.0.06.01-219-84

References

• Allen, F., Qian, J. and Qian, M. (2005). Law, finance, and economic growth in China. Journal of Financial Economics, 77, 57-116.
• Altunbas, Y. and Marqués, D. (2008). Mergers and acquisitions and bank performance in Europe: The role of strategic similarities. Journal of Economics and Business, 60, 204-222.
• Anderson, R., Mansi, S. and Reeb, D. (2004). Board characteristics, accounting report integrity, and the cost of debt. Journal of Accounting and Economics, 37(3), 315-342.
• Anderson, H.D., Marshall, B.R. and Wales, R. (2009). What is the relationship between investor protection legislation and target takeover returns? Evidence from Europe. Journal of Multinational Financial Management, 19, 291-305.
• Ball, R., Kothari, S. and Robin, A. (2000). The effect of international institutional factors on properties of accounting earnings. Journal of Accounting and Economics, 29, 1-51.
• Ball, R., Robin, A. and Wu, J.S. (2003). Incentives versus standards: properties of accounting income in four East Asian countries. Journal of Accounting and Economics, 36, 235-270.
• Barako, D.G., Hancock, P. and Izan, H.Y. (2006). Factors influencing voluntary corporate disclosure by Kenyan companies. Corporate Governance: An International Review,14(2), 107-125.
• Barniv, R., Myring, M. and Thomas, W. (2005). The Association Between the Legal and Financial Reporting Environments and Forecast Performance of Individual Analysts. Contemporary Accounting Research, Vol.22, No.4, 727-758.
• Barth, M.E., Landsman, W.R., Lang, M. and Williams, C. (2012). Are IFRS-based and US GAAP-based Accounting Amounts Comparable?. Journal of Accounting and Economics, 54(19, 68-93.
• Beck, T., Demirgüç-Kunt, A. and Levine, R. (2003). Law and finance: why does legal origin matter?. Journal of Comparative Economics, 31, 653-675.
• Boubakri, N., Cosset, J-C. and Guedhami, O. (2005). Post-privatization corporate governance:The role of ownership structure and investor protection. Journal of Financial Economics, 76, 369-399.
• Bottazzi, L., Da Rin, M. and Hellmann, T. (2009). What is the role of legal systems in financial intermediation? Theory and evidence. J. Financial Intermediation, 18, 559-598.
• Bris, A. and Cabolis, C. (2008). The value of investor protection: Firm evidence from cross-border mergers. Review of Financial Studies, 21, 605-648.
• Brown, P., Preiato, J. and Tarca, A. (2014). Measuring Country Differences in Enforcement of Accounting Standards: An Audit and Enforcement Proxy. Journal of Business Finance & Accounting, 41(1-2), 1-52.
• Bushman, R.M., Piotroski, J.D., and Smith, A.J. (2004). What determines corporate transparency?. Journal of Accounting Research, 42(29), 207-252.
• Carlin, W. and Mayer, C. (2003). Finance, investment, and growth. Journal of Financial Economics, 69, 191-226.
• Chahine S. and Filatotchev, I. (2011). The effects of corporate governance and audit and non-audit fees on IPO value. The British Accounting Review, 43, 155-172.
• Chen, K.C.W., Chen, Z. and Wei, K.C.J. (2009). Legal protection of investors, corporate governance, and the cost of equity capital. Journal of Corporate Finance, 15, 273-289.
• Chiaramonte, L., Croci, E. and Poli, F. (2015). Should we trust the Z-score? Evidence from the European Banking Industry. Global Finance Journal, 28, 111-131.
• Christensen, H., Hail, L. and Leuz, C. (2013). Mandatory IFRS reporting and changes in enforcement. Journal of Accounting and Economics, 56, 147-177.
• Ciobanu, R. (2015). Mergers and acquisitions: does the legal origin matter?. Procedia Economics and Finance, 32, 1236-47.
• Cohen, J., Moorthy, G. and Wright, A. (2002). Corporate governance and the audit process. Contemporary Accounting Research, 19(4), 573-594.
• Choi, J. H. and Wong, T. J. (2007). Auditors’ governance functions and legal environments: An international investigation. Contemporary Accounting Research, 24, 13-46.
• Daske, H., Hail, L., Leuz, C. and Verdi, R. (2008). Mandatory IFRS Reporting Around the World: Early Evidence on the Economic Consequences. Journal of Accounting Research, 46(5), 1085-1142.
• DeFond, M. and Zhang, J. (2014). A review of archival auditing research. Journal of Accounting and Economics, 58, 275-326.
• Ding, Y., Jeanjean, T. and Stolowy, H. (2005). Why do national GAAP differ from IAS? The role of culture. The International Journal of Accounting, 40, 325-350.
• Drever, M., Stanton, P. and McGowan, S. (2007). Contemporary Issues in Accounting, Australia: John Wiley&Sons Australia, Ltd.
• Engel, E., Hayes, R.M. and Wang, X. (2010). Audit committee compensation and the demand for monitoring of the financial reporting process. Journal of Accounting and Economics, 49, 136-154.
• Fairfax, L.M. (2009). The Legal Origins Theory in Crisis”, BYU L. Rev. 1571 (2009). Available at: https://digitalcommons.law.byu.edu/lawreview/vol2009/iss6/5
• Filip, A., Labelle, R. and Rousseau, S. (2015). Legal Regime and Financial Reporting Quality. Contemporary Accounting Research, 32(1), 280-307.
• Florou, A. and Pope, P. (2012). Mandatory IFRS Adoption and Investor Asset Allocation Decisions. The Accounting Review, Vol.87(6), 1993-2025.
• Goodwin, J., Karman, A. and Heanly, R. (2009). Corporate Governance and the Prediction of the Impact of AIFRS Adoption. Abacus, 45, 124-145.
• Hay, D., Knechel, W.R. and Ling, H. (2008). Evidence on the impact of internal control and corporate governance on audit fees. International Journal of Auditing, 12(1), 9-24.
• Hitz, J-M., Ernstberger, J. and Stich, M. (2012). Enforcement of Accounting Standards in Europepp. Capital-Market-Based Evidence for the Two-Tier Mechanism in Germany. European Accounting Review, 21(2), 253-281.
• Hope, O-K. (2003a). Firm-level disclosures and the relative roles of culture and legal origin. Journal of International Financial Management and Accounting, 14(3), 218-248.
• Hope, O.-K. (2003b). Disclosure Practices, Enforcement of Accounting Standards, and Analysts’ Forecast Accuracy: An International Study. Journal of Accounting Research, 41(2), 235-272.
• Jaggi, B. and P. Low. (2000). Impact of Culture, Market Forces, and Legal System on Financial Disclosures. The International Journal of Accounting, Vol.35 No.4, 495-519.
• Kuo, N-T. and Lee, C-F. (2018). Investor legal protection, capitalized development costs, and audit fees: A cross-country analysis. Journal Int Financ Manage Account.; 29, 57-82.
• La Porta, R., Lopez-de-Silanes, F., Shleifer, A. and Vishny, R. (1998). Law and Finance. Journal of Political Economy, 106(6), 1113-1147.
• La Porta, R., Lopez-de-Silanes, F., Shleifer, A. and Vishny, R.W. (1997). Legal Determinants of External Finance. The Journal of Finance, 52(3), 1131-1150.
• La Porta, R., Lopez-de-Slanes, F., Shleifer, A. and Vishny, R. (2000). Investor Protection and Corporate Governance. Journal of Financial Economics, 58, 3-27.
• La Porta, R, F. Lopez-de-Silanes, Shleifer, A. and Vishny, R. (2006). What Works in Securities Laws?. The Journal of Finance, 61(1), 1-32.
• La Porta, R, Lopez-De-Silanes, F. and Shleifer, A. (2008). The economic consequences of legal origins. Journal of Economic Literature, 46, 285-332.
• Leuz, C., Nanda, D. and Wysocki, P.D. (2003). Earnings management and investor protection: an international comparision. Journal of Financial Economics, 69, 505-527.
• Leuz, C. (2010). Different approaches to corporate reporting regulation: how jurisdictions differ and why. Accounting and Business Research, 40(3), 229-256.
• Marshall, B.R. and Anderson, H.D. (2009). Regulation and target takeover returns: Is there a link?. Pacific-Basin Finance Journal, 17, 395-412.
• Martynova, M. and Renneboog, L. (2008). Spillover of corporate governance standards in cross-border mergers and acquisitions. Journal of corporate finance, 14, 200-223.
• Matoussi, H. and Jardak, M.K. (2012). International Corporate Governance and Finance: Legal, Cultural and Political Explanations. The International Journal of Accounting, 47, 1-43.
• Mitton, T. (2002). A cross-firm analysis of the impact of corporate governance on the East Asian financial crisis. J. Financ. Econ. 64(2), 215-241.
• Munisi, G. and Randøy, T. (2013). Corporate governance and company performance across Sub-Saharan African countries. Journal of Economics and Business, http://dx.doi.org/ 10.1016/j. jeconbus.2013.08.003.
• Naiker, V. and Sharma, D.S. (2009). Former audit partners on the audit committee and internal control deficiencies. The Accounting Review, 84, 559-587.
• Nobes, C. (1998). Towards a General Model of the Reasons for International Differences in Financial Reporting. Abacus, 34(2), 162-87.
• Pope, P. and McLeay, S. (2011). The European IFRS Experiment: Objectives, Research Challenges and Some Early Evidence. Accounting and Business Research, 41(3), 233-66.
• Preiato, J., Brown, P. and Tarca, A. (2015). A Comparison of Between-Country Measures of Legal Setting and Enforcement of Accounting Standards. Journal of Business Finance and Accounting, 42(1-2), 1-50.
• Rainsbury, E., Braudbury, M. and Cahan, S.F. (2009). The impact of audit committee quality on financial reporting quality and audit fees. Journal of Contemporary Accounting and Economics, 5, 20-33.
• Rossi, S. and Volpin, P.F. (2004). Cross-country determinants of mergers and acquisitions. Journal of Financial Economics, 74, 277-304.
• Rustam, S., Rashid, K. and Zaman, K. (2013). The relationship between audit committes, compensation incentives and corporate audit fees in Pakistan. Economic Modelling, 31, 697-716.
• Shirasu, Y. (2018). Long-term strategic effects of mergers and acquisitions in Asia-Pacific banks. Finance Research Letters, 24, 73-80.
• Starks, L.T. and Wei, K.D. (2013). Cross-Border Mergers and Differences in Corporate Governance. International Review of Finance 13(3), 265-297.
• Tsui, J.S.L., Jaggi, B. and Gul, F.A. (2001). CEO domination, discretionary accruals and audit fees. Journal of Accounting, Auditing and Finance, 16(3), 189-207.
• Wang, J.W. and Yu, W.W. (2015). The Information Content of Stock Prices, Legal Environments, and Accounting Standards: International Evidence. European Accounting Review, 24(3), 471-493.
• Zakaria, R., Fernandez, W.D. and Schneper, W.D. (2017). Resource availability, international acquisition experience, and cross-border M&A target search: A behavioral approach. Multinational Business Review, 25(3), 185-205.