The post-merger performance of acquiring firms: a re-examination of an anomaly

Article Abstract:

The existing literature on the post-merger performance of acquiring firm is divided. We reexamine this issue, using a nearly exhaustive sample of mergers between NYSE acquires and NYSE/AMEX targets. We find that stockholders of acquiring firms suffer a statistically significant loss of about 10% over the five-year post-merger period, a result robust to various specifications. Our evidence suggests that neither the firm size effect nor beta estimation problems are the cause of the negative post-merger returns. We examine whether this result is caused by a slow adjustment of the market to the merger event. Our results do not seem consistent with this hypothesis. (Reprinted by permission of the publisher.)

Acquisitions and mergers

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Corporate capital structure, agency costs, and ownership control: the case of all-equity firms

Article Abstract:

This paper provides evidence that all-equity firms exhibit greater levels of managerial stockholdings, more extensive family relationships among top management, and higher liquidity positions than a matched sample of levered firms. Further, top managers of all-equity firms with family involvement in corporate operations have greater control of corporate voting rights than managers of all-equity firms without family involvement. These findings are consistent with the interpretation that managerial control of voting rights and family relationships among senior managers are important factors in the decision to eliminate leverage. (Reprinted by permission of the publisher.)

Analysis, Stocks, Management research, Family-owned business enterprises, Family-owned businesses

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Managerial incentives and corporate investment and financing decisions

Article Abstract:

This paper examines the relationship between common stock and option holdings of managers and the choice of investment and financing decisions by firms. The authors find support for the hypothesis of a positive relationship between the security holdings of managers and the changes in firm variance and in financial leverage. This conclusion is based on sample of acquiring and divesting firms. The findings are consistent with the hypothesis that executive security holdings have a role in reducing agency problems. (Reprinted by permission of the publisher.)

Planning, Compensation and benefits, Investments, Executives, Executive compensation, Incentive stock options

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