Document Type
Article
Publication Date
6-16-2018
Abstract
We examine the corporate governance roles of information quality and the takeover market with asymmetric information regarding the value of the target firm. Increasing information quality improves the takeover efficiency however, a highly efficient takeover market also discourages the manager from exerting effort. We find that perfect information quality is not optimal for either current shareholders’ expected payoff maximization or expected firm value maximization. Furthermore, current shareholders prefer a lower level of information quality than the level that maximizes expected firm value, because of a misalignment between current shareholders’ value and total firm value. We also analyze the impact of antitakeover laws, and find that the passage of antitakeover laws may induce current shareholders to choose a higher level of information quality and thus increase expected firm value.
Recommended Citation
Li, J., Nan, L. & Zhao, R. (2018). Corporate governance roles of information quality and corporate takeovers. Review of Accounting Studies, 23(3): 1207-1240. doi: 10.1007/s11142-018-9449-z
Peer Reviewed
1
Copyright
Springer
Included in
Business Administration, Management, and Operations Commons, Business Intelligence Commons, Business Law, Public Responsibility, and Ethics Commons, Organizational Behavior and Theory Commons, Other Business Commons
Comments
This is a pre-copy-editing, author-produced PDF of an article accepted for publication in Review of Accounting Studies, volume 23, issue 3, in 2018 following peer review. The final publication is available at Springer via DOI:10.1007/s11142-018-9449-z.