Principal-principal conflicts in Asean 5 mergers and acquisitions
Banchit, A. (2013). Principal-principal conflicts in Asean 5 mergers and acquisitions (Thesis, Doctor of Philosophy (PhD)). University of Waikato, Hamilton, New Zealand. Retrieved from http://hdl.handle.net/10289/7840
Permanent Research Commons link: http://hdl.handle.net/10289/7840
The thesis investigates principal-principal (PP) conflicts arising in mergers and acquisitions (M&A) in Asean 5 countries; Indonesia, Malaysia, the Philippines, Thailand and Singapore. This thesis is the first study adapting the well-established Lintner dividend model (Lintner, 1956) to examine the potential use of the model as measurement of PP conflicts in Southeast Asian market study where availability of continuous long-term data are usually lacking. The issue is of importance to investors and for the growth of equity markets in Asean countries in Southeast Asia and probably well beyond. According to prior research, large controlling shareholders in Asian public listed companies do cause agency conflicts (Becht, Franks, Mayer, & Rossi, 2010; Burkart & Lee, 2008; Claessens, Djankov, Fan, & Lang, 2002). However, the net effect cannot be estimated with any degree of accuracy without understanding and being able to distinguish the single effect of an investment project. The relationship between large shareholders and agency conflicts is difficult to test empirically since no public information is provided at the individual investment project level, which differs from cases of corporate mergers and acquisitions (M&A) (Amihud, Lev, & Travlos, 1990). This thesis is novel in that it reduces this gap by extending a recently developed framework of PP conflicts by investigating the impact of large controlling shareholders in M&A in Asean 5 countries; Indonesia, Malaysia, Philippines, Singapore and Thailand. Four main components make up for the contributions that can be drawn from this thesis. First, the issue of PP conflicts, argued by Young, Peng, Ahlstrom, Bruton and Jiang (2008) as a major and especially prevalent concern in emerging markets. Broadly, PP conflicts refer to conflicts between controlling shareholders and minority shareholders in a corporation (Dharwadkar, George, & Brandes, 2000) and include an element of expropriation of profit. The second component is where M&A provides situations in which PP conflicts may be worsen. It is noted that M&A activities in Asean 5 are highly significant. Thirdly, this research is the first direct study of PP agency conflicts, ownership and financial variables for Asean 5 public listed companies. Finally, the fourth component is that the study includes elements of time-invariant (including rarely changing variables) and time-variant variables in the panel data model analysis which provide additional confirmation of the veracity of the modelling and robustness of analysis. Compared to prior studies undertaken elsewhere, the sophistication and robustness of the micro-econometric analysis used in the research is a significant enhancement. Data needed to test various hypotheses are sourced from the SDC M&A Database, SDC Ownership database and Thomson One Banker Database. Further data have been collected from companies listed in the individual stock exchange markets of the five countries. The task was not straightforward and while appropriate to recognise efforts by various databases to collect and compile helpful sources, there remains much more work to be done in terms of manual collection of data from published annual reports. This exercise leads to the final sample which comprises of 1,013 deals (807 acquiring companies) from years 2000 to 2008 in various industries. Statistical and data issues, such as controlling for endogeneity effects, and treatment of time-invariant and time-variant data in the models, are systematically addressed. The diagnostic testing opens up the potential for the analysis to utilise Hausman-Taylor (HT) and fixed-effects vector decomposition (FEVD) techniques. The current research extends the econometric robustness of analysis using Tobit regression. PP conflicts associated with M&A are found to be rampant. Furthermore, PA conflicts are also significant in this region. These suggest consequences in terms of limited willingness by investors to participate in share investment as part of individuals’ portfolios strategy. Similarly, challenges by regulators in each capital market to promote the secondary market are addressed in this thesis by advocating the use of dividend ratio policies as an indicator for PP conflicts.
University of Waikato
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