Family firms and high technology Mergers & Acquisitions

While some of the above issues could relate to other types of ownership concentration, we do not have large state ownership in Canada and very large institutional ownership is rare in publicly listed companies because of portfolio and risk considerations (see King and Santor 2008).

See Adams and Ferreira (2008) for a review of the literature on the impact of the use of control enhancing mechanisms (dual class shares, stock pyramids and cross-ownership) on firm performance.

See Kohers and Kohers (2000) for a list of SDC database high tech industries sectors.

Our sample selection procedure is consistent with prior M&A research using the SDC worldwide M&A database (see for example, Rau and Vermaelen (1998) and Faccio and Stolin (2006)). The first five selection criteria resulted in an initial sample of 342 high-tech takeovers. Consistent with the event-study methodology, 46 observations with less than 100 valid returns over the 200-day estimation period were dropped from the sample. We further eliminated 58 observations because their proxy circulars were not available on the SEDAR website to code their ownership structure, governance and executive compensation data. Finally, following normality diagnostic test on our dependent variable CAR (−1, +1), 23 outliers were excluded. Our final sample includes 215 high-technology M&A undertaken by 105 unique acquirers. Given that our sample includes multiple acquirers over the period 1997–2006, Huber/White/Sandwich estimators of variance allowing for observations that are not independent within clusters (105 unique acquirers) are used to compute t-statistics in all regression models.

National Policy NP 58-201 ‘Corporate Governance Guidelines’ and National Instrument NI-58-101 ‘Disclosure of Corporate Governance Practices’ provide a comprehensive description of the Canadian corporate governance regime. Broshko and Li (2006) discuss also the main differences between corporate governance regimes in Canada and the US.

Firms with <100 valid returns over the estimation period were excluded from the sample.

We reran the regressions with a dummy using 20 % threshold, spline dummies at the 10–25 % level and more than 25 % (in Canada the disclosure threshold is 10 %, contrary to the US disclosure threshold of 5 %) and one with a 10–50 % and more than 50 % dummy (consistent with the Cascino et al. (2010) discussion of majority ownership and control). Results are consistent across various specifications so for brevity we only present those at the 10 % level.

Faleye and Huson (2002) find a positive relation between a measure of board effectiveness and bidder returns. Firms receive high scores on the board effectiveness factor when they have small, independent board that meet frequently.

See Dalton et al. (1998), Kang and Zardkoohi (2005) for a review of the board leadership structure literature.

Similar to, among others, Brick et al. (2006), Archambeault et al. (2008), we implement the stock option valuation method of Core et al. (1999) where we value stock options at 25 % of their exercise price. Besides its simplicity, Core et al.’s approach produces results that are in the range of those generated by complex valuation models (see, for instance, Lambert et al. 1991; Core et al. 1999).

As additional sensitivity tests (un-tabulated results), we run regressions using market adjusted returns and find similar results. We also use alternative definitions for related industry (same SDC macro industry code, same 1 digit SIC codes) and replace the all cash dummy by the level of cash paid and results remain the same.