The sources of value destruction in acquisitions by entrenched managers

• 成果类型: Article
• 署名作者: Harford, Jarrad; Humphery-Jenner, Mark; Powell, Ronan
• 署名单位: University of New South Wales Sydney; University of Washington; University of Washington Seattle; Tilburg University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2012.05.016
• 发表日期: 2012
• 页码: 247-261
• 关键词: CORPORATE GOVERNANCE; mergers; entrenchment; BLOCKHOLDERS; OVERPAYMENT

摘要

Prior work has established that entrenched managers make value-decreasing acquisitions. In this study, we determine how they destroy that value. Overall, we find that value destruction by entrenched managers comes from a combination of factors. First, they disproportionately avoid private targets, which have been shown to be generally associated with value creation. Second, when they do buy private targets or public targets with blockholders, they tend not to use all-equity offers, which has the effect of avoiding the transfer of a valuable blockholder to the bidder. We further test whether entrenched managers simply overpay for good targets or choose targets with lower synergies. We find that while they overpay, they also choose low synergy targets in the first place, as shown by combined announcement returns and post-merger operating performance. (C) 2012 Elsevier B.V. All rights reserved.