ECONOMICS OF THE FIRM

Discuss the above statement.
b) Discuss the potential problems that may stop takeover mechanism from functioning as an effective corporate governance mechanism.
2000 words
Reading:
Journal of Economic Perspectives Symposia on “Takeovers”, Vol. 2, No. 1, 1988 and “Changes in Corporate Structure”, Vol. 15, No. 2, 2001.
Caves, R. E. (1989), “Mergers, takeovers and economic efficiency: Foresight vs hindsight”, International Journal of Industrial Organisation, Vol. 7, pp. 151-74.
Jensen, M. (1988), “Takeovers: Their Causes and Consequences”, Journal of Economic Perspectives, Vol. 2, pp. 21-48.
Martynova, M. & L. Renneboog, (2008), “A century of corporate takeovers: What have we learned and where do we stand?”
Shleifer A. & R. Vishny, (1997), “A survey of corporate governance”, Journal of Finance, vol. 52, No. 2, pp. 737-783.
Weir, C. (1997), “Corporate governance, performance and takeovers: An empirical analysis of UK mergers”, Applied Economics, Vol. 29, pp. 1465-75.
Those are the feedback from last year to take into account
? There was confusion about the difference between discussing (as was requested) and summarising the paper. It was necessary to summarise first and then provide a reflective assessment (a critique). However, most just provided a summary of the paper. Besides, not the summary of entire paper but some parts of the paper (see next comment, mainly the summary of construction of the governance index). A good discussion should have been involved not just summarising the drawbacks of the methodology/findings of the paper but also incorporates other related theoretical/empirical papers to either discuss for or against the argument stated in the paper. I should also note that it was however not about just findings other key papers in this area and discussing around that. It is also about what you understand from the paper what you have learned in the lecture/readings. Only a few of you mention Tirole Ch1.
? Most tried to explain the governance index in detail. It was fine to do that but the assignment is not about defining the governance index only. There was a clear misunderstanding/avoidance to explain/discuss the rest of the paper in particular the empirical findings. The least explained part of the paper was section on empirical findings; in particular section V. Some, however, only discussed the hypotheses but ignored the fact that the authors’ construction of an index was the key in their empirical analysis.
? A few have done a good search of the literature to support their arguments. You were expected to include the appropriate empirical evidence, wherever necessary, to support your explanations and argument. However, some quoted excessively from either Gompers et. al. (2003) or from other studies. Discussion does not mean that you can cut/paste from other studies.
? Problems in referencing within the text and at the end of your assignment (in reference section). For instance some although cited in the text but did not put in references. Some referenced but there was no coherence in terms of the style of referencing.
? A few did not provide a word count. Also, some of you may have found difficult to write within word-limit. This was mainly due to the fact that some points were repeated unnecessarily. However, I should also indicate that some were too short.
? Below what you might have included in your assignment
o Definition of the governance index
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o Explaining why Gompers et. al. (2003) construct such index and significance of it (some references could have been included, in particular why such index is important in this literature)
o Discussion of empirical methodology/ findings. In particular, to what extent is the paper tests three hypotheses stated.
o Does the more recent empirical literature support the findings of the paper?
o What is the link between the empirical findings and the theory you studied in corporate governance and so forth.”
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