Corporate integrity and hostile takeover threats: Evidence from machine learning and “CEO luck”

Viput Ongsakul, Pattanaporn Chatjuthamard, Pornsit Jiraporn, Sirithida Chaivisuttangkun

Research output: Contribution to journalArticlepeer-review

Abstract

Exploiting an innovative measure of corporate integrity based on machine learning and textual analysis, this paper explores the effect of hostile takeover exposure on corporate integrity. Using a measure of takeover vulnerability principally based on state legislation, we find that a more active takeover market raises corporate integrity, corroborating the notion that the disciplinary mechanism associated with the takeover market induces managers to enhance corporate integrity. Specifically, a rise in takeover exposure by one standard deviation results in an improvement in integrity by 4.00%. Further analysis confirms the conclusion including propensity score matching, entropy balancing, and instrumental-variable analysis. Our study is among the first to employ this novel text-based measure of corporate integrity. Finally, additional analysis based on ”CEO luck” validates the conclusion.

Original languageEnglish (US)
Article number100579
JournalJournal of Behavioral and Experimental Finance
Volume32
DOIs
StatePublished - Dec 2021

All Science Journal Classification (ASJC) codes

  • Finance

Cite this