| Summary: | This paper examines the disciplining function of hostile takeovers in the United Kingdom in 1985 and 1986. The authors report evidence of high board turnover and significant levels of posttakeover restructuring. Large gains are anticipated in hostile bids as reflected in high bid premiums. However, there is little evidence of poor performance prior to bids, suggesting that the high board turnover does not derive from past managerial failure. Hostile takeovers do not, therefore, perform a disciplining function. Instead, rejection of bids appears to derive from opposition to posttakeover redeployment of assets and renegotiation over the terms of bids.
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