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Purpose
The purpose of this study is to examine the effects of ownership structure on merger and acquisition (M&A) decisions of Brazilian listed companies.


Design/methodology/approach
This paper is an applied and explanatory research based on secondary data. The sample is comprises non-financial companies listed on the BM&FBovespa between 1998 and 2007. Considering that the dependent variable is binary, the authors estimate panel data logistic regression models. Considering the existence of conflicts of interest among those who have the decision-making power and the supplier of capital for M&A transactions, they draw upon the Agency Theory to develop the theoretical hypotheses.


Findings
The results show that, for a sample of Brazilian non-financial companies listed on the BM&FBovespa (B3), from 1998 to 2007, Brazilian firms present, on average, a highly concentrated ownership structure and the major controlling shareholders are families or the State. These characteristics are negatively related to the likelihood of M&A transactions, as most of these controlling shareholders are reluctant to adopt mechanisms that reduce their control.


Research limitations/implications
With regard to the limitations, this study considered only the M&A definitions as stated by the Bureau van Dijk database. In this sense, future studies may analyze the effects of ownership structure based on other M&A definitions and typologies. In addition, the study is limited to the period from 1998 to 2007, which is prior to the international financial crisis. Future studies may extend the analysis period to include the post-crisis period (2008) to check if there are differences in M&A strategies before and after the crisis.


Practical implications
From a managerial perspective, the results show that minority shareholders have little or no influence over an M&A decision, so they cannot decide on the use of resources for fast growth and access to new markets through M&A. Thus, the investment decision must take into account the nature and the quality of the controlling shareholder.


Social implications
This study shows a significant and negative effect of ownership concentration on the likelihood of M&A transactions. In part, this result demonstrates the importance of understanding the behavior of controlling shareholders before inferring on other key aspects that the M&A literature tends to make fundamental in explaining M&A decisions in publicly traded companies, particularly, in an environment of low minority shareholder protection.


Originality/value
Previous studies have partly found that the M&A decision is motivated by individual advantages obtained from increasing the size of the firm, or from managerial hubris. The results show that these hypotheses do not hold in the Brazilian context. Moreover, the results indicate that M&A decisions are associated with the characteristics of the controlling shareholder, their level of ownership concentration and their typology, contributing to the agency debate on whether the incentive or the entrenchment effect prevails in the context of the agency problem between controlling and minority shareholders, particularly, in an institutional environment of low shareholder protection.

AbstractResearch Question/IssueDo the motivations of cross‐border minority acquisitions differ from those of domestic minority acquisitions? We examine and compare the underlying motivations for and consequences of domestic and cross‐border minority acquisitions by analyzing data from transactions that took place across 31 countries over a 13‐year period.Research Findings/InsightsUsing a sample of 11,926 domestic and cross‐border minority acquisitions, we show that the interplay of financing and country‐level governance motives is the main driver of such deals in both settings. We find that financially constrained firms are more likely to engage in both domestic and cross‐border minority acquisitions, even in the face of higher information asymmetry and transaction costs that international transactions entail. In the wake of either domestic or cross‐border deals, financially constrained firms' long‐term debt increases; their short‐term debt, cash holdings, and equity decrease. The greater likelihood of minority acquisitions of financially constrained firms is explained by the degree of corporate governance institutions in the country in which the targeted firm is based and by differences in levels of creditor and shareholder protections between the home countries of the targeted and acquiring firms involved. Our results remain robust after controlling for alternative explanations such as the contracting motive, the gravity model of foreign transactions, economic development levels, and differences in tax and exchange rates.Theoretical/Academic ImplicationsOur results extend prior literature on mergers and acquisitions that have focused solely on control transfers or domestic deals. We provide empirical evidence for the importance of jointly considering financing and governance motivations in seeking to explain domestic and cross‐border minority acquisitions and their consequences in alleviating financial constraints. We provide new evidence on how firm‐ and country‐level characteristics interact to affect minority acquisitions.Practitioner/Policy ImplicationsOur results offer valuable insights for business policy by highlighting how firms can circumvent financial constraints through partial integration, especially in cross‐border settings. The results also offer evidence of beneficial ex post outcomes for targeted firms' leverage and liquidity. In terms of public policy, the results show that minority shareholder protections improve the equity market and provide a positive externality to the debt market through a certification effect.

AbstractManuscript TypeEmpiricalResearch Question/IssueWhile corporate governance research is the beneficiary of advances in research methodologies and statistical techniques, less attention has been placed on variable measurement. This paper draws into question the conceptualization and measurement of CEO duality by highlighting its largely unrecognized instability and the challenges instability imposes on measuring dichotomous variables. CEO duality is widely used in corporate governance research and frequently operationalized dichotomously as a dummy variable. We present examples of the frequent changes in duality within organizations which challenge our current view of CEO duality.Research Findings/InsightsWe find that the instability of CEO duality in practice varies considerably at both the national and within‐firm levels. We find that a mismatch exists between the current conceptualization of CEO duality, actual patterns of data, and the measures used by governance researchers. The paper draws attention to the limits of conceptualizing and measuring what is seemingly dichotomous data, reviews these in research and in practice, and provides examples, recommendations and assessments of alternate ways existing data can be used.Theoretical/Academic ImplicationsOur results draw into question the reliance on a simple dichotomous conceptualization and operationalization of CEO duality in governance research. Data limitations of corporate governance research may be alleviated by directly assessing stability of duality within firms and reimagining concepts in ways that can be measured using existing data.Practitioner/Policy ImplicationsCEO duality, a legal but discouraged governance structure, may be changed intentionally or result from a variety of temporary firm‐level factors. Assessing the longitudinal patterns in duality and underlying causes for temporary changes in duality should be incorporated into evaluations of firm governance structures.