This paper examines the impact of frequent changes of investor protection regulation on the bid premium levels and the reception of the bid by the minority shareholders in blockholder regimes. In order to document the corporate governance function of takeover regulation, we explore a comprehensive data set representing more than 90% of the takeovers organized in Romania between 1998 and 2012. The peculiar institutional framework in Romania allows factoring in the analysis a hitherto unexplored structural element, namely the parallel control transactions managed by the government, outside the stock market structures. After controlling for the influence of corporate governance and ownership attributes of targets, our main findings suggests that various market price components are strong predictors of both bid premiums and tender success. Besides, the alignment of legal details to the requirements of the European takeover regulation has a surprising negative effect on minority claimants. If the shareholders are indeed able to distil the pertinent information about a bid, our overall result suggests that the balance between competing concerns of protecting minority shareholders and facilitating value-creating transactions is still open to debate in emerging markets
This paper examines the impact of frequent changes of investor protection regulation on the bid premium levels and the reception of the bid by the minority shareholders in blockholder regimes. In order to document the corporate governance function of takeover regulation, we explore a comprehensive data set representing more than 90% of the takeovers organized in Romania between 1998 and 2012. The peculiar institutional framework in Romania allows factoring in the analysis a hitherto unexplored structural element, namely the parallel control transactions managed by the government, outside the stock market structures. After controlling for the influence of corporate governance and ownership attributes of targets, our main findings suggests that various market price components are strong predictors of both bid premiums and tender success. Besides, the alignment of legal details to the requirements of the European takeover regulation has a surprising negative effect on minority claimants. If the shareholders are indeed able to distil the pertinent information about a bid, our overall result suggests that the balance between competing concerns of protecting minority shareholders and facilitating value-creating transactions is still open to debate in emerging markets
This paper examines the impact of frequent changes of investor protection regulation on the bid premium levels and the reception of the bid by the minority shareholders in blockholder regimes. In order to document the corporate governance function of takeover regulation, we explore a comprehensive data set representing more than 90% of the takeovers organized in Romania between 1998 and 2012. The peculiar institutional framework in Romania allows factoring in the analysis a hitherto unexplored structural element, namely the parallel control transactions managed by the government, outside the stock market structures. After controlling for the influence of corporate governance and ownership attributes of targets, our main findings suggests that various market price components are strong predictors of both bid premiums and tender success. Besides, the alignment of legal details to the requirements of the European takeover regulation has a surprising negative effect on minority claimants. If the shareholders are indeed able to distil the pertinent information about a bid, our overall result suggests that the balance between competing concerns of protecting minority shareholders and facilitating value-creating transactions is still open to debate in emerging markets
This paper examines the impact of frequent changes of investor protection regulation on the bid premium levels and the reception of the bid by the minority shareholders in blockholder regimes. In order to document the corporate governance function of takeover regulation, we explore a comprehensive data set representing more than 90% of the takeovers organized in Romania between 1998 and 2012. The peculiar institutional framework in Romania allows factoring in the analysis a hitherto unexplored structural element, namely the parallel control transactions managed by the government, outside the stock market structures. After controlling for the influence of corporate governance and ownership attributes of targets, our main findings suggests that various market price components are strong predictors of both bid premiums and tender success. Besides, the alignment of legal details to the requirements of the European takeover regulation has a surprising negative effect on minority claimants. If the shareholders are indeed able to distil the pertinent information about a bid, our overall result suggests that the balance between competing concerns of protecting minority shareholders and facilitating value-creating transactions is still open to debate in emerging markets
The spectacular failure of the 150-year old investment bank Lehman Brothers on September 15th, 2008 was a major turning point in the global financial crisis that broke out in the summer 2007. Through the use of stock market data and Credit Default Swap (CDS) spreads, this paper examines the investors' reaction to Lehman's collapse in an attempt to identify a contagion effect on the surviving financial institutions. The empirical analysis indicates that (i) the collateral damages were limited to the largest financial firms; (ii) the most affected institutions were the surviving "non-bank" financial services firms (mortgage and specialty finance, investment services, and diversified financial services firms); (iii) the negative effect was correlated with financial conditions of the surviving institutions. We also detect significant abnormal jumps in the CDS spreads after Lehman's failure that we interpret as evidence of sudden upward revisions in the market assessment of future default probabilities for the surviving financial firms.
The philosophy behind the debt market discipline approach to banking regulation presumes that the pricing of bank debt securities, if accurate, conveys reliable signals to supervisors. In this paper, we take a critical look at the feasibility of such an approach by exploring empirically the possibility that markets may price differently the risk profile of bank issuers along the empirical distribution of credit spread. The paper proposes a quantile regression framework to draw novel inferences about the functioning of market discipline and the quality of private monitoring in European banking and provides a more comprehensive picture of the distribution of spreads conditional on its main explanatory factors. We find that the spread-risk relationship is systematically steeper and more significant at the "right-tail" of the conditional distribution of credit spread, which suggests that the market is somewhat tougher with "high-risk" banks.
The spectacular failure of the 150-year old investment bank Lehman Brothers on September 15th, 2008 was a major turning point in the global financial crisis that broke out in the summer 2007. Through the use of stock market data and Credit Default Swap (CDS) spreads, this paper examines the investors' reaction to Lehman's collapse in an attempt to identify a contagion effect on the surviving financial institutions. The empirical analysis indicates that (i) the collateral damages were limited to the largest financial firms; (ii) the most affected institutions were the surviving "non-bank" financial services firms (mortgage and specialty finance, investment services, and diversified financial services firms); (iii) the negative effect was correlated with financial conditions of the surviving institutions. We also detect significant abnormal jumps in the CDS spreads after Lehman's failure that we interpret as evidence of sudden upward revisions in the market assessment of future default probabilities for the surviving financial firms.
The philosophy behind the debt market discipline approach to banking regulation presumes that the pricing of bank debt securities, if accurate, conveys reliable signals to supervisors. In this paper, we take a critical look at the feasibility of such an approach by exploring empirically the possibility that markets may price differently the risk profile of bank issuers along the empirical distribution of credit spread. The paper proposes a quantile regression framework to draw novel inferences about the functioning of market discipline and the quality of private monitoring in European banking and provides a more comprehensive picture of the distribution of spreads conditional on its main explanatory factors. We find that the spread-risk relationship is systematically steeper and more significant at the "right-tail" of the conditional distribution of credit spread, which suggests that the market is somewhat tougher with "high-risk" banks.
The philosophy behind the debt market discipline approach to banking regulation presumes that the pricing of bank debt securities, if accurate, conveys reliable signals to supervisors. In this paper, we take a critical look at the feasibility of such an approach by exploring empirically the possibility that markets may price differently the risk profile of bank issuers along the empirical distribution of credit spread. The paper proposes a quantile regression framework to draw novel inferences about the functioning of market discipline and the quality of private monitoring in European banking and provides a more comprehensive picture of the distribution of spreads conditional on its main explanatory factors. We find that the spread-risk relationship is systematically steeper and more significant at the "right-tail" of the conditional distribution of credit spread, which suggests that the market is somewhat tougher with "high-risk" banks.
The spectacular failure of the 150-year old investment bank Lehman Brothers on September 15th, 2008 was a major turning point in the global financial crisis that broke out in the summer 2007. Through the use of stock market data and Credit Default Swap (CDS) spreads, this paper examines the investors' reaction to Lehman's collapse in an attempt to identify a contagion effect on the surviving financial institutions. The empirical analysis indicates that (i) the collateral damages were limited to the largest financial firms; (ii) the most affected institutions were the surviving "non-bank" financial services firms (mortgage and specialty finance, investment services, and diversified financial services firms); (iii) the negative effect was correlated with financial conditions of the surviving institutions. We also detect significant abnormal jumps in the CDS spreads after Lehman's failure that we interpret as evidence of sudden upward revisions in the market assessment of future default probabilities for the surviving financial firms.