The sources of value destruction in acquisitions by entrenched managers

Files in This Item:
File Description SizeFormat 
Harford_Powell_Sources_of_Value_Destruction.pdf709.88 kBAdobe PDFDownload
Title: The sources of value destruction in acquisitions by entrenched managers
Authors: Harford, Jarrad
Humphery-Jenner, Mark
Powell, Ronan
Permanent link:
Date: Nov-2012
Online since: 2016-02-10T11:06:13Z
Abstract: 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.
Type of material: Journal Article
Publisher: Elsevier
Journal: Journal of Financial Economics
Volume: 106
Issue: 2
Start page: 247
End page: 261
Copyright (published version): 2012 Elsevier
Keywords: Corporate governance; Mergers; Entrenchment; Blockholders; OverpaymentCorporate governanceMergersEntrenchmentBlockholdersOverpayment
DOI: 10.1016/j.jfineco.2012.05.016
Language: en
Status of Item: Peer reviewed
Appears in Collections:Business Research Collection

Show full item record

Citations 5

Last Week
Last month
checked on Mar 20, 2019

Google ScholarTM



This item is available under the Attribution-NonCommercial-NoDerivs 3.0 Ireland. No item may be reproduced for commercial purposes. For other possible restrictions on use please refer to the publisher's URL where this is made available, or to notes contained in the item itself. Other terms may apply.