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Introduction

The process of globalization has inspired a growing amount of literature that examines drivers of mergers and acquisitions (M&As)—a major component of direct investment. In the 21st century, the global M&A transactions created a new record both in quantity and scale - the M&A activity has become an important way to seek resources and development (Yong & Yongqing, 2013). Over the last decade, we have witnessed a merger wave reaching its peak in 2007 at the announced M&A volume of US$ 4.5 trillion worldwide. This surge was followed by a collapse in 2008-2009, and a restored growth in 2009-2015 with the worldwide M&A volume reaching US$ 3.3 trillion in 2015 (Linnane, 2015). At the same time, Moeller, Schlingemann, and Stulz (2005) reveal that shareholders in the acquiring firms endure losses that average 12 cents for each dollar spent on acquisitions. It is challenging to reconcile this increasing amount of investment in M&A with the empirical finding that on average, mergers fail to create value for the acquiring firm's shareholders - ‘the success paradox' (Cording, Christmann, & Bourgeois, 2002).

One potential answer to this could be that not all M&As destroy value. Consistent with this line of reasoning, a substantial body of literature has tried to identify different acquirer, target and deal features that justify the inconsistency in M&A performance. The three most commonly used explanatory variables are relatedness of the acquirer and target (Weber, Tarba Yedidia, & Reichel, 2009), acquirer's experience (Nadolska & Barkema, 2014), and the method of payment (Savor & Lu, 2009). However, a meta-analysis done by King et al. (2004) has shown that none of these variables are significantly related to M&A performance on average, suggesting a need for additional theory development. This paper proposes that the concentration of ownership and the identity of the owners are important, but neglected, dimensions of ownership structure with important implications for corporate strategy and M&A performance.

The concept of corporate ownership and its impact on the company performance is already quite known from an overall company performance perspective. That branch of research has focused on the concentration of ownership from an agency theory perspective impacting the performance of the company as a whole (Short, 1999). It has long been argued that in contexts where a large concentration of ownership exists, ownership structure facilitates expropriation of small or minority shareholders by the large ones or majority shareholders such as promoters and families. They could, for example, divert the funds and strategic decisions towards their own benefits (Young, 2008). This paper will extend this research by looking at M&A performance in particular and compare widely held companies to majority-owned and comparing their M&A performance. As argued by Fan (2011), this is one of the key directions in which future research should be extended. The reason for that is the fact that presenting these issues would enable us to understand the dynamics and struggles of power within the governance of the company as well as to see how large shareholders interact and share their power.

Soersen (1974) was one of the first ones who claimed that besides the degree of control (ownership concentration), the location of control (identity of the shareholder) is also an important determinant of the relationship between ownership and performance. Thomsen and Pedersen (2000) found that the identity of the owners has implications for their objectives and the way they exercise their power, and this is reflected in company strategy with regard to profit goals, dividends, capital structure, and growth rate. Empirical research seems to confirm this thesis for various types of shareholders. For instance, Boone et al. (2011) found that companies who have shareholders that are financial institutions perform better compared to their peers. Foreign shareholders, in turn, are geographically located outside the country - making it challenging to get closer to the directors and influence decision-making process, thus rising monitoring costs (Ganiyu & Abiodun, 2012). Based on this, it would be very interesting to see whether the identity of the shareholder plays a significant role in the performance of the acquirer following the recent acquisition. The findings are especially interesting considering that this topic has been rather neglected by the literature of the M&A context (Short, 1999).

According to Soersen (1999), one another important factor playing a role in the relationship between the strategic objectives of the owners is the management board of the company. Management boards are the internal executive mechanism that forms firm governance, given their direct access to the two other parts in the corporate governance triangle: managers and shareholders (Yena & Andre, 2007). This paper is going to analyze how management boards affect the relationship between the shareholders and the M&A performance. In particular, how the size of the management board and the tenure of the CEO affect the relative ownership costs for each ownership type. Ownership costs can be defined as monitoring and risk-bearing costs as defined by Brickley & Christopher (1987) and are likely to be different for different types of owners depending on their strategic objectives and priorities. This will enable to give a comprehensive picture of the processes and mechanism existing between different players and the ability of the board to execute the strategic plan of the shareholders and perform successful M&As.

Literature regarding M&A has also noticed that environmental context has an impact on the success of M&A transaction. Hu and Izumida (2008) state that the inability of research to establish a clear link between ownership structure and corporate performance is that this relation may change depending on the realities of corporate governance environment – “communities, political environments, cultures and ideologies, industry organization and financial markets and laws”. Research has mainly focused on six groups of external factors that might have an impact on the M&A performance of the companies based in a country (Moeller, Faelten, Appadu, & Vitkova, 2012) these being legal and political factors, economic factors, technological and socio-cultural factors.  This research is going to focus on one of the largest markets of Central Eastern Europe – Poland and there are a few reasons for looking at Poland in a more detailed way.

Firstly, relatively little research on M&A has been conducted in the countries in Central and Eastern Europe (CEE) which do not fall under traditional Anglo-American and European-Japanese governance systems (Young, 2008). Exploring the issue of M&A may be interesting in such economy because of specific environment in which firms operate. Poland has been a transitional economy, which has recently implemented large-scale privatization program. Therefore, it is characterized by the relative weakness of external mechanisms of control within takeovers, labor market, and the legal system, the importance of internal mechanisms, and notably ownership concentration, is likely to be stronger (La Porta, Lopez-de-Silanes, Shleifer, & Vishny, 2002). For that matter, M&As as a means to grow is rather new in Poland meaning managers have less experience in terms of integration and drawing synergies out of the acquisition (Grosfeld, 2009). That also means that a large part of all the businesses are “foreign”, with mainly a few utilities left in Polish hands. This is unprecedented for a country of Poland's size and level of development. Also, definitely not typical in developed countries of Western Europe (Olex-Szczytowski, 2015). Such rapid changes in ownership structure, rather unusual for a stable market economy, offer a particularly suitable and unique framework for exploring the ownership structure and its impact on firm performance. At the same time, the Polish market, remains a major and dominating market in Central Europe, both in terms of number and value of mergers and acquisitions completed (Gide Louretter Nouel, 2015) providing a great sample of completed deals.

This paper will draw on the work of Hansmann (1988) to form hypotheses regarding the consequences of owner concentration and identity taking into account the relative costs of different ownership types. Analyzing the different ownership structures within the Polish business environment leads to the research questions of this paper:

What is the relationship between corporate ownership of a company and its M&A performance within the context of a transformational economy of Poland?

The main questions that this research is hoping to answer are:

(i) How does the concentration of ownership affect the M&A performance (widely-held vs. majority –owned companies)?

(ii) What is the relationship between ownership identity (family-, state-, institutionally- and foreign- owned companies) and M&A performance?

(iii) In what way does the management board affect the relationship between ownership and M&A performance?

Theory and Hypotheses

Ownership concentration

Previous literature notices that the effects of ownership concentration on firm performance are rather complex and ambiguous and looks at the topic mainly from the agency theory perspective. Concentrated ownership is likely to improve performance by increasing monitoring and lightening the free-rider problem (Shleifer & Vishny, 1986). The relative costs of ownership – namely the monitoring costs, are much lower for majority shareholders who are able to better control the company resulting in its better overall performance (Brickley & Christopher, 1987). However, taking into consideration the environmental context of this research, the ownership structure in Poland has rapidly evolved meaning that private benefits of control are large and the quality of investor protection regime is relatively low compared to the conditions in the UK and the US (Grosfeld & Hashi, 2007). “Weak governance and limited protection of minority shareholder's intensives traditional principal-agent problems and create unique agency problems - expropriation”. Expropriation takes place within the context of weak government when dominating owners deprive minority owners the right to appropriate returns on their investments – ‘entrenchment theory' (Morck, Shleifer & Vishny, 1988).

Looking specifically at the M&A context, Frederikslust et al. (2007) found that companies with dispersed ownership prefer profitable takeover targets whereby their own value increases. The reason for that is that widely-held bidders may find it too costly to provide the level of monitoring required to turn around a badly performing target firm so they prefer profitable takeovers as a means to grow a company in a quicker manner. They may find it easier to boost financial performance by taking over profitable firms rather than by improving the financial results of their current businesses which can be much more challenging and last longer. Building up on the empirical results of Frederiklust et al. (2007), the new hypothesis is constructed:

H1: Companies with concentrated ownership are characterized by significantly lower abnormal stock returns following an M&A activity

Ownership Identity

Regarding the processes behind the identity of the shareholders influencing the company's performance, following Hansmann (1988, 1996) as well as Padersen and Thomasen (1999), this paper will use relative costs and benefits of ownership for each category as the benchmark for assessing its dominant objectives. The authors have also attempted to model the firm as a node of contracts with a number of different stakeholders such as governments, families, institutional investors. Ownership can be assigned to any of these stakeholders, who will have to bear the costs of ownership, but will be relieved of the costs of market contracting.

Costs of ownership include monitoring and risk-bearing costs, but also costs of collective decision making, which can be large if the owners are a large and heterogeneous group.

The costs of contracting consist of market power distortions, information costs as well as asset specificity. Taking all these costs into consideration, the optimal ownership type minimizes the ownership costs and costs of market contracting. Furthermore, independent of the optimality of the present owners, the economic behavior of shareholders will be influenced by their ownership costs and benefits (Hansmann, 1988). For example, financial strategy in relation to capital rationing, time horizons, and risk aversion are likely to influence the company and its overall strategy (Fama & Jensen, 1983; Short, 1999; Short, 1999).

Family

A firm is classified as being controlled by a family when there is an individual or a group of individuals (identified by family surname) belonging to the same family who controls the majority block of shares. Family ownership is often associated with a two-folded role of the family as owners and managers of the firm. They often make firm-specific investments in human capital that make them reluctant to give up the control. This might lead to family firms seeking mainly to benefit the family's interests at the expense of minority shareholders, and thus negative shareholder returns would be expected when the M&A is announced (Claessens, Djankov, Fan, & Lang, 2002). Large shareholders, like families, may transfer assets or profits to other firms that they own (i.e. tunneling) (La Porta, Lopez-de-Silanes, Shleifer, & Vishny, 2002). Tunneling refers to excessive compensation for family positions in the firm, advantageous transfer prices or loans, loan guarantees, or M&A operations that enhance the value of other owned companies. Furthermore, Perez-Gonzalez (2011) found that the negative impact of family shareholding can be even greater when family members hold executive positions in the firm. In that case, the opportunity costs created by a suboptimal appointment will be shared across all shareholders whereas the benefits come down exclusively to the family. This is called “family-firm opportunism in M&As”.

On the other hand, family firms may be characterized by long-term perspectives, given their interest in transferring the business on to future generations (James, 1999). Thus, strategic decisions such as M&As would be fostered. Ben-Amar and André (2006) find that abnormal returns around the announcement of the acquiring firm, for a sample of Canadian transactions, are positive and greater for family versus non-family firms, 2.1% versus 0.2% abnormal returns, respectively. They state that market participants do not perceive families as using M&As to obtain private benefits at the expense of other shareholders. Furthermore, reduced management-shareholder agency conflicts in family firms means that shareholders have much lower costs of monitoring the management, which might favor positive shareholder valuation, when M&As are announced (Anderson & Reeb, 2003). This is called “family-firm efficiency in M&As”. This line of argument leads to the following hypothesis:

H2: Family-owned companies are characterized by significantly higher abnormal stock returns following an M&A activity

State

Following Berkman's methodology (2010), if the largest shareholder of a firm is government or a government institution, the firm is classified as state-owned. Generally, there is no conclusion among researchers regarding the impact of state ownership of a firm on its performance and M&A success. Chen et al. (2007) prove that state-owned firms have lower profitability and lower market valuation, while Calomiris et al. (2010) and a few other researchers find a positive relation between state ownership and firm value. The main reason identified by them is the relatively stable market position of such companies, backed by the governments.

In terms of M&A activity in particular, because of the substantial political power of state-owned enterprises with governments behind their activity can bring about some benefits. First of all, government is the ultimate investor of state-owned enterprises and the ultimate bearer of operating results, which encourages banks and financial institutions to lend to state-owned enterprises (Wang & Xu, 2004). Secondly, the government could promote corporate mergers and acquisitions of the companies it owns, by providing preferential policies in taxation and other aspects and also seek funding support for enterprises through their influence (such as the impact on banks' credit decisions). So state-owned enterprises are easier to loan their M&A activity which can leave less burden on their post-merger financial situation (Gao, Hu, & Tian, 2013).

Yet, empirical evidence often suggests that the market has generally more confidence in private ownership acquisitions rather than state-owned reflecting the conventional belief that state is less likely to make more efficient and profitable use of target assets (Zhou, Guo, Hua, & Doukas, 2015). A worse performance of state-owned companies is embedded in the principal-agent issues (Putterman, 1993). Property-rights over the enjoyment and disposal of assets are weakened in government-owned enterprises because a market for corporate control is absent. Capitalization of future consequences into current share prices is inhibited, leading to a reduction in owners' incentives to monitor managers and the exit option that can be exercised where there is a market for corporate control is not viable. Consequently, there is a lack of capital market discipline to which state-owned enterprise agent-managers can be subjected to by owner-principals (Stulz, 1988). Governments are also likely to pay more attention to political goals such as low output prices, employment or external effects relative to profitability. In fact, nonprofit, a welfare-maximizing behavior is one of the main rationale for state ownership (Chhibber & Sumikt, 1998).

Furthermore, literature also points out that acquisitions performed by the state-owned companies in transformational countries work quite differently compared to acquisitions done by state companies in developed Western markets, emphasizing main three reasons. Firstly, stated owned companies in the former socialist economies have had fundamentally different management, control, and incentive practices which is believed to still have its impact on the functioning of these firms making them less efficient (Berkman, Cole, & Fu, 2010). Indeed, Polish state companies are known to get assigned new executive and management boards whenever there is a new power shift in the government. When Jaroslaw Kaczynski took over a post of prime minister for almost 1,5 years in 2006, over 1,5 thousand of managers lost their posts. Within the seven years under the prime minister Donald Tusk, that number was 6,6 thousand (Miśków, 2015). The new politically connected managers are often a channel through which government exerts its intervention (Fan & Goyal, 2006) where managers are expected to fulfill social objectives such as regional economy development, employment, and social stability, either because of their political duty or personal benefits. That means that often the pure performance of the company is not the most important indicator of the performance of the management and executive board. Literature points that this enhanced government intervention and lack of independent judgment of the company management reduces the post-M&A performance (Qugui, Tianpei, & Tian, 2013). Secondly, the overall efficiency of firms in the transformational economies is often low, and therefore, they may require large-scale post-acquisition restructuring and leadership transformation (Berkman, Cole, & Fu, 2010). Finally, government intervention in the deal can be extensive. Thus, the conditions specified by the government are a crucial part of the acquisition deal that might affect its success. Considering that the governments in transitional countries are less efficient than the ones in the developed countries, their involvement is likely to impact the M&A performance more negatively (Uhlenbruck & De Castro, 2000).

Relating back to the theory of relative costs and benefits of ownership, evidence suggests that the costs of monitoring for state owned companies are rather large. The reason for that is the fuzziness of owners' identity leading to incentives to free-ride and a lack of effective monitoring (Berkman, Cole, & Fu, 2010). The state is able to share the costs of monitoring with others – governmental departments. Theoretically, this should stimulate superior performance, compared to private sector because ownership is not diffused among many owners. However, the control of government-owned enterprises is vested in persons who are themselves agents monitoring other agents and have no incentives for carrying out their tasks (Majdmar, 1998). The above-mentioned theory leads to the next hypothesis:

H3: State-owned companies are characterized by significantly lower abnormal stock returns following an M&A activity

Institutional Investors

Another meaningful owner of companies is institutional investors (e.g. banks, insurance companies, pension funds, labor unions). The measure of institutional investor ownership follows the method adopted by Hartzell and Starks (2003) whereby the proportion of total institutional investor ownership is calculated in each firm and if that exceeds 50% of all shares, a firm is classified as owned by institutional investors.

Regarding empirical proof, the prevailing evidence points out that their presence is significantly and positively correlated with bidder long-term announcement abnormal returns (Yena & Andre, 2007). Gillan and Starks (2003) argue that institutional investors play a special governance role in corporations worldwide – driving up firm valuation and performance and reducing capital expenditures. Most theoretical explanations on why institutional investors might be performing well rely on the function of institutional investors as corporate monitors – efficiency-augmentation hypothesis. McConnell and Servaes (1990) conclude that the percent of institutional investor ownership is positively related to firm's performance. Likewise, Del Guercio and Hawkins (1999) also find a positive relationship between institutional investor ownership and various measures of firm performance.

Chung (2002) finds that large institutional shareholdings in a firm deter managers from pursuing opportunistic earnings management through discretionary accrual choices. Also, Parrino et al. (2003) show that institutional selling is associated with forced CEO turnover and that these CEOs are more likely to be replaced with an outsider. Thus, institutional investors can effectively ‘‘vote with their feet'' when dissatisfied with a firm's management. Nesbitt (1994), Smith (1996) and Del Guercio and Hawkins (1999) all have found evidence consistent with the hypothesis that corporate monitoring by institutional investors can result in managers focusing more on corporate performance and less on opportunistic or self-serving behavior. Hence, if institutional investors have the capacity to judge the quality of individual transactions and effectively intervene, or if their presence signals the credible promise of punishing value-reducing actions motivated by managerial incentives, then their presence would reduce the incidence of negative bidder NPV M&A (Qiu, 2003).

On the other hand, according to the efficiency-abatement hypothesis (Duggal & Millar, 1999) institutional investors do not act as effective monitors due to their short term vision and passivity. Prior empirical studies obtain mixed evidence on the relationship between institutional ownership and acquiring firm performance. Wright et al. (2002) document a positive relation between institutional shareholding and announcement period cumulative abnormal returns whereas Duggal and Millar (1999) do not find any evidence that institutional investors enhance acquiring firm performance. Kohers and Kohers (2000) find that higher institutional ownership is associated with lower excess returns post- acquisition. Regarding, the costs and benefits of ownership, it is argued that institutional investors have myopic investment objectives, which causes them to sell the stock of an underperforming company rather than to have a long term perspective (buy and hold strategy) and to pressure managers to pursue value-enhancing changes through active monitoring (Bris & Cabolis, 2008). This consideration of institutional investors and their impact on M&A performance leads to the next hypothesis:

H4: Institutionally-owned companies are characterized by significantly higher abnormal stock returns following an M&A activity

Foreign Investors

A company is considered as being held by foreign investors whenever over 50% of its ownership is in hands of a company or an investor based outside of the country where this research will be conducted - Poland. In this method I follow the method used by Chari, Chen & Dominguez (2011). When analyzing the relationship between foreign ownership and firms' performance as whole, most of the research seems to be clear about its benefits. For example, Aitkin and Harrison (1999) conclude from a sample of Venezuelan firms that foreign ownership is correlated with productivity improvements. Arnold and Javorcik (2005) use plant-level data from Indonesia and find that foreign ownership leads to significant improvements in productivity in the year of acquisition as well as in subsequent years. The reason for that is the restructuring performed by foreign investors which include for example new investment and increase in employment and wages. Furthermore, these owners enhance integration of the company into the global economy by increasing exports and imports.

Regarding the impact on foreign ownership on the M&A performance, there is much less research outlining this relationship, especially in the context of a transformational economy. Harris and Robinson (2003) find that foreigners tend to acquire better performing firms as compared with other companies – they “cherry-pick”, meaning that the M&A transactions are generally regarded as a success by the market. Their results show that foreign investors are able to exert pressure because they have fewer business relations with the firm to jeopardize, unlike domestic institutions.

On the other hand, research by Ferreira, Massa and Matos (2009) on the sample of U.S. data show that foreign portfolio investors tend to receive lower abnormal returns as compared to the home bidders when investing in the country of the listing. It is possible that domestic bidders, perhaps due to a superior knowledge of the home markets incur lower costs of ownership, and therefore, are in a better position to exploit economic synergies following the takeover. This theory leads to the next hypothesis:

H5: Foreign-owned companies are characterized by significantly lower abnormal stock returns following an M&A activity

Management Board

If a particular group of shareholders wants to exercise its control effectively over the management of the firm, they must incur the costs of monitoring. Jensen and Meckling (1976) mentioned that these costs include (i) becoming informed about the activities of the firm, (ii) making decisions and exchanging information with the management board as well as (iii) bringing the decision to bear on the firm's management. The size of these costs are likely to be different, based on the different type of the shareholder – e.g. his geographical proximity to the firm, which this paper is already analyzing in different ownership type. However, the characteristics of the management board are also likely to impact these costs of monitoring for shareholders which are included in the overall costs and benefits of each ownership type. According to Jensen (1993), one of such factors affecting the monitoring costs is the size of the management boards. For example, Ganiyu & Abiodun (2012) found that larger board sizes make firms more likely to take risk and seek external sources of finance for expansion and aggressive exploitation of investment opportunities. Jansen (1993) found that keeping the boards small helps to improve the communication, coordination of tasks and decision-making effectiveness. More importantly, however, it also affects the relationship with the shareholders in a way that smaller boards are easier to control by the shareholders than the larger boards in ways of gaining more informal contact. Following this logic, the larger size of the management board increases the monitoring costs of ownership. If all else is equal, then the shareholders who have the lowest costs of monitoring are the most efficient owners which is likely to translate into the performance of the company (Hansmann, 1988). Larger boards, in turn, lead to the reshaping of the relationship between the shareholders and the company performance in a way that more power might be given to the management board, therefore weakening the ways in which the shareholder influence the company.

This leads to the following hypothesis:

H6: The larger size of the management board has a negative impact on the relationship between corporate ownership and M&A performance

CEO Tenure

Another factor which is expected to affect relative costs and benefits of different ownership identities is the expertise and experience of the management board – the CEO of the board in particular (Bertrand and Schoar, 2003). According to Fung, Jo and Tsai (2009), long CEO tenure is a sign for experience, hence CEOs with a shorter tenure are more likely to involve in value destroying activities because of lack of sufficient experience. Furthermore, CEO tenure can be seen as an indicator for knowledge development – the longer the CEO works in the board, the more able he/she is to make well-founded decisions (Adams, Almeida, & Ferreira, 2005). In this sense, one of the part of the monitoring of the shareholders – namely ‘decision making' can be fulfilled to a better extent by the more experienced CEO. This is believed to be decreasing the ‘monitoring costs' of the shareholders and, hence, increase the overall performance of the company. Previous research also notices that CEOs are likely to be one of the major influencers of M&A activities and the way they are executed (Sanders, 2001). This leads to another hypothesis:

H7: The tenure of the CEO has a positive impact on the relationship between corporate ownership and M&A performance

By analyzing all these factors, this paper aims to establish a relationship between ownership structure and M&A performance. Based on the established theories and proposed hypotheses mentioned above, the relationship should look as follows, whereby the management board plays a role of the moderator on the relationship between ownership structure and M&A performance:

Figure 1 Relationship between ownership structure and M&A performance

Data and Methodology

Data Sample

The hypotheses were tested on all M&A deals performed by firms listed on the Warsaw Stock Exchange. Year 1991 was chosen as the first year as it marked the beginning of the Warsaw Stock Exchange (April 1991), whereas April 2016 as the last period. The M&A data is acquired from Thomson One database and was selected based on the following set of criteria (Bris & Cabolis, 2008). Firstly, buyouts, recapitalizations, privatizations, exchange offers, repurchases and minority stake purchases were removed from the sample. Furthermore, only public companies were included in the paper, because of the availability of information on their M&A activity as well as possibility to measure the abnormal returns of the stock price following the acquisition. Financial, insurance as well as utility companies are excluded from this research because acquisitions in these industries are heavily regulated as well as the fact that they are often performed for various reasons other  (Sanders, 2001). Furthermore, both domestic (within Poland) as well as foreign acquisitions were be taken into account.

The sample of 501 companies present on the Warsaw Stock Exchange made a total of 1663 acquisitions in the period between years 1991 and 2016. On average, companies made 3,58 acquisitions in this period. The number of acquisitions performed have been growing since the beginnings of the Warsaw Stock Exchange in 1991, which is shown in the figure 2 below.

Figure 2: Number of M&A deals over years (year 2016 is measured until April)

The sample firms have, on average, 6,602 employees, $1.32 billion in sales and assets with a book value of $731.45 million. The companies are active in a wide variety of industries such as construction, transportation, media and chemicals. The sample companies made 462 foreign acquisitions in the period analyzed, however it is remarkable that the last decade has brought a substantial increase in the number and value of M&As performed by Polish companies abroad. Almost 65% of all foreign acquisitions have been performed in the last 5 years.

The data regarding the ownership of the companies (concentration as well as owner identity) was derived from the DataStream platform – Zephyr as well as directly from annual reports of the companies. This data was then allocated to one of the five groups of owners: family, state, widely-held, institutions and foreign owners based on the identity of the largest investor. The ownership has been changing for some companies throughout the period analyzed, however each transaction was treated as a separate one, however controlled for fixed effects of a company. On average, 39% of the companies in the sample are family owned, 29% are foreign owned, 29% are institutionally owned, 17% are foreign, 9% are government and 6% are widely-held. Furthermore, the % ownership rate of the largest investor was measured based on the data from Zephyr and on average, the largest investor's ownership rate was 57.7%.

Regarding the corporate governance, Polish companies have clearly defined management boards which differ between companies. The information about the boards was collected from the annual reports of the companies. The average management board size in this sample was 3.12 and usually comprised of the president and his deputy, as well as of the heads of the main functional departments such as finance and marketing. These boards meet regularly and take responsibility for the strategic decisions made within the company, hence also strategic decisions such as M&A. The average tenure time of the CEO was 6,33 years across all the companies.

Variables

Dependent Variable – ‘M&A Deal Performance'

M&A performance will be measured by the cumulative abnormal returns on the price of shares of the acquirer surrounding an M&A deal announcement. This will be a good estimate of the performance of a particular M&A deal (Brown & Warner, 1985). Assuming that capital markets are efficient, public information should be incorporated into the stock price, making the well-established event study methodology (Brown & Warner, 1985) an appropriate measure. This way the change in wealth of acquiring firm's shareholders around the announcement of the transactions was evaluated. Focusing on the announcement date, rather than the effective date, lets to capture the reaction of the market more accurately in line with the Efficient Market Hypothesis (Fama & Jensen, 1983), which claims that the share price will change as a result of new public information such as M&A announcement.

The initial step in the event study was setting up the estimation window, under which the expected average return was calculated in order to construct a benchmark to compare market reaction around the M&A announcement with the normal expected return. In line with previous research, this paper used 90 trading days as the estimation window (Hayward & Hambrick, 2007). Next step was to choose the event window. In order to determine that, I have conducted a T-test to assess the significant days for abnormal returns in the study.

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