The disciplinary role of unsuccessful takeovers and changes in corporate governance

This study examines if unsuccessful takeovers trigger the replacement of directors and changes in other governance attributes and result in improvements in target firm performance. Using an Australian sample this study finds that following failed bids, target firms are more likely to remove directors and experience an increase in director ownership, board independence, and block ownership. In contrast, target firm director expertise and prestige decrease following failed bids. We also find that post-bid accounting and stock performance of targets are largely unrelated to changes in governance attributes after the unsuccessful takeover.