THE EFFECT OF CORPORATE GOVERNANCE ON ABNORMAL RETURNS AROUND BUSINESS COMBINATIONS USING PLS-SEM

Corporate governance provides the course and control by which directors steer and supervise their respective companies in light of stewardship and sustainability. Bound to guide and guard these firms, it aims to equitably account and address the competing interests of different stakeholders. This paper endeavours to establish the effect of corporate governance on abnormal returns around business combinations among publicly listed companies that undertook complete mergers and acquisitions in the Philippines from 2000 to 2015 using Partial Least Squares – Structural Equation Modeling (PLS-SEM). Particularly from three years before to three years after the year of business combination, it determines that corporate governance has significant positive effect on abnormal returns. It suggests that in the context of business combinations, firms reasonably provide their directors and executives equitable compensation packages by which they are satisfyingly empowered to efficiently and effectively work in advancing the optimal returns thereto