| Summary: | 碩士 === 國立東華大學 === 國際經濟研究所 === 93 === Takeover market is often suggested as ideal for containing the agency problem of corporate free cash flow. Faleye (2004) focused on the takeover-deterrence effects of excess cash and suggested the proxy contest as an effective control mechanism for addressing the agency problems of excessive corporate liquidity.
I find that the probability of proxy fight is significantly increasing in excess cash holding of positive object, but significantly decreasing of negative object due to takeover-deterrence effects of corporate liquidity. Proxy fight announcement return is positive. The result may be explained to follow the news of proxy fight or in terms of insider’s information, but not related to excess cash. Following a proxy contest, executive turnover increases and target firms face to corporate restructuring or force to dispose of land. Furthermore, cash holdings decline following a proxy contest. This is not due to increase cash distributions to shareholder. Instead, management wastes it or fights against dissidents. So market/book ratio declines after a proxy contest. Investors don’t anticipate the proxy contest is an effect control mechanism and wealth-increasing effects.
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