WEALTH CREATION AND BID RESISTANCE IN UK TAKEOVER BIDS

In this paper we investigate the determinants of, and relationship bet ween, wealth creation and bid resistance for a sample of 178 successfu l takeover bids in the U.K. Within the context of an event study appro ach we test a range of hypotheses against a background that recognizes the existence of agency conflict and the role of corporate governance mechanisms designed to mitigate its effect. The results obtained are interpreted within the context of the U.K. corporate environment. We f ind that wealth creation and bid resistance are mutually dependent on each other. We find evidence suggesting the presence of managerial and financial synergy but the absence of operational synergy. Our results also suggest that there is some conflict between managers and shareho lders but that significant monitoring is exercised by the particular g overnance mechanisms we investigate. (C) 1997 by John Wiley & Sons, Lt d.