Relationship Among Ownership Concentration,Top Management Turnover And M&A Performance

The separation of ownership and management in modern enterprises has brought forth the principal-agent theory.The ownership structure and the top management function as body and mind of an enterprise.Both are closely related to the development of the enterprise,while a gamble exists between the two.Previous studies have found that managers may pursue self-interest at the cost of the shareholders’ interest,which negatively influences the companies’ performance.Given the separation of ownership and management right,how should we view the relationship between these rights?Which has a greater impact on the enterprise?Whether the impact of top management has on the enterprise is overestimated?Nearly a century after the advent of the principal-agent theory,these problems are worthy of re-examination and validation.Merger and acquisition(M&A)activities provide abundant opportunities for research on the principal-agent theory as they are often accompanied with deep changes in both ownership structure and top management.Based on the data of A-share listed companies in Shanghai and Shenzhen stock exchanges from 2008 to 2017,this paper uses empirical research methods to explore the relationship among enterprise ownership,top management rights and enterprise performance,by taking 245 listed companies undergoing M&A as samples.The M&A performance of different stages of the companies are measured by 12,24 and 36 months’ Buy-and-Hold Abnormal Returns(BHAR)after M&A.The corporate performance before M&A is measured by Return on Assets(ROA)of the previous year.Ownership concentration is determined by the shareholding ratio of the new largest shareholder,and the change of top management is evaluated by both whether the top management turnover occurred within the year of the merger and if the successor was appointed by the top shareholder.The relationship among M&A performance,ownership concentration and top management turnover is explored through multiple linear regression,while the impact of ownership concentration and prior performance on top management turnover is tested through logistic regression.Through the above research,four conclusions could be drawn from this study.First,this paper finds a statistical significant positive correlation between ownership concentration and corporate performance after M&A.Second,the probability that a successor is appointed by the new major shareholder has a statistical significant positive correlation with ownership concentration.Third,there are statistical significant evidences that the enterprises’ prior performance negatively correlates with both turnover occurred in the top management as well as the likelihood that the successors are appointed by the major shareholders.Fourth,no significant correlations are found between the companies’ M&A performance and either the occurrence of top management turnover,or the sources of the successors.This indicates that to a certain extent,top management plays the role of "scapegoat" for poor corporate performance.In summary,through empirical research,this paper confirms that in modern enterprises where ownership and management rights are separated,ownership has a more farreaching impact on the enterprise than the management right,while the impact of top management as agents is more or less overestimated.