CANCELED: Shareholder Activism, M&A Completion, and the Long-Term Effect of Agency Violations on Firm Performance

Research on agency theory provides explanation and evidence of shareholder value destruction through M&A activity. We extend this research by looking beyond agents’ M&A activity to agents’ probability to withdraw from contested acquisitions. Specifically, we theorize on and model the effectiveness of different channels of post-announcement shareholder activism (e.g. stock sell-off & abnormal returns, board activism and shareholder protection) in the first stage. In a second stage of analysis we assess the long-term performance effects of agents violating shareholders’ interests by completing contested deals. Using a sample of 10,770 acquisitions, we find that, on average post-announcement stock-selloffs, board activism and shareholder protection laws decrease the probability of acquisition completion. In the long-term, agents announcing better deals and avoiding violations of agency by completing contested deals create more long-term shareholder value.