Shareholder involvement and M&A announcement returns : evidence from Thailand

Abstract

How corporate governance mechanism helps prevent underperformance of acquiring firms is controversial, especially with little evidence in Asia-Pacific literature. I examined how shareholder involvement by means of mandatory shareholder voting (class 1) and required information disclosure (class 2) under the SET’s Acquisition and Disposition Rule affected the market reaction on mergers and acquisitions. I did not find significant differences in the CARs among transaction classes with different degree of shareholder involvement. The results were consistent both in univariate and multivariate analysis which deal- and firm-level factors are controlled. I investigated further and found that concentrated ownership in Thai firms did not impact the effectiveness of shareholder voting. Finally, I applied the regression discontinuity design technic as a robust test with the SET’s Rule’s 4 criteria ratios as a forcing variable. The hypothesized jump in the CARs between class 1 and class 2 transaction is still not statistically significant.