Does Corporate Governance Matter More for High Financial Slack Firms?
研究公司治理效果是否取决于企业财务松弛水平，发现反收购法通过后，财务松弛高的企业绩效下降更明显，支持了浪费性支出假说。
The effect of corporate governance may depend on a firm’s financial slack. On one hand, financial slack may be spent by managers for their private benefits; a high level is likely associated with severe agency conflicts. Thus corporate governance matters more for high financial slack firms (i.e., the wasteful spending hypothesis). On the other hand, financial slack provides insurance against future uncertainties; a low level may signal deviations from the best interests of shareholders. Then corporate governance is more effective for low financial slack firms (i.e., the precautionary needs hypothesis). We differentiate the two hypotheses using the passage of antitakeover laws to identify exogenous variation in governance. Consistent with the wasteful spending hypothesis, the laws’ passage has a larger negative impact on the operating and stock market performance of high financial slack firms. Further analysis shows that these firms do not invest more but become less efficient at cost management after the laws’ passage. This paper was accepted by Wei Jiang, finance.