Question

The M&A environment as often been characterized as the market for corporate governance. Followers of the efficient market theories argue that M&A activity promotes efficiency in firms and markets. Given your experience so far, comment on this. GIve an example of a merger or acquisition that makes your point.

Answer 1

“Corporate governance” explains as the top management process that manages value creation and transference among, various corporate claimants and ensures accountability as well to these claimants. Corporate governance is consider as process which focus on an outcome.

The M&A within the country as well as cross-border M&As , mainly when either of the firms are located in a developed market offers an excellent opportunity of development and creation of value for firms and investors .

The followers of EMH theories supports the M&A not only for efficiency by synergy but sudden positive change in the market value of firm as well . The firms acquire targets located in Developed nations change two distinct attributes of corporate governance along with ownership structure and board characteristics.In addition to changes in firm-specific corporate governance, such acquisition exhibit higher valuation. Overall, results from many M&A support the argument of better firm-level and improved corporate governance target can be achieved by the M&A process .The process of M&A start showing it impact from day of announcement in case of listed stocks in exchanges.

Some examples in support of my arguements are :

AT&T and Time Warner mergers not only increase the market value of these firm by operational synergy but also the improvement in corporate governance inmedia industry as whole.

Bayer and Monsanto

and many more .