Managerial Risk Taking Incentives And Merger Decisions
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Managerial Risk Taking Incentives And Merger Decisions
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Author : Chen Lin
language : en
Publisher:
Release Date : 2017
Managerial Risk Taking Incentives And Merger Decisions written by Chen Lin and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.
We provide evidence concerning the effect of managerial risk-taking incentives on merger and acquisition (M&A) decisions and outcomes for different types of mergers: vertical, horizontal, and diversifying. Using chief executive officer (CEO) relative inside leverage to proxy for the incentives of risk-averse managers, we find that CEOs with higher inside leverage are more likely to engage in vertical mergers, and those mergers generate lower announcement returns for shareholders. This effect of CEO relative inside leverage on returns for shareholders in vertical acquisitions is more pronounced when the acquirer has a higher degree of informational opacity, weak governance, and excess cash.
Managerial Incentives And Corporate Acquisitions
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Author : Athanasios Tsekeris
language : en
Publisher:
Release Date : 2015
Managerial Incentives And Corporate Acquisitions written by Athanasios Tsekeris and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.
This thesis examines the impact of executive compensation on the quality of corporate acquisition decisions. A number of different issues are empirically investigated. The analysis begins with the examination of the relation between the incentives managers are provided with via their compensation contracts and the riskiness of mergers and acquisitions (M&As) investigating whether this relation is affected by the passage of the Sarbanes-Oxley Act (SOX) in 2002. The study then focuses on the performance of acquiring firms exploring how and whether managerial incentives can induce value-increasing acquisitions conditional on the intensity of M&A activity. The final part of the empirical analysis examines whether the legal status of the target firm has any implications for the effectiveness of incentive compensation to mitigate managerial risk-aversion and increase shareholder value. The thesis contributes both to academic literature and to practice by identifying areas of inefficiencies of equity-based compensation contracts to mitigate agency costs. More specifically, new evidence is provided on the effectiveness of incentive compensation to induce risk-taking activity under the impact of stricter regulation. While compensation-related incentives are positively associated with the riskiness of acquisition decisions before 2002, managers have become considerably less responsive to such incentives after the enactment of SOX. Moreover, although incentive compensation can improve deal performance and overcome adverse selection concerns by inducing managers to acquire when it is optimal to do, it is not related to value-increasing decisions when acquisitions are initiated during periods of merger waves. It is further found that equity-based compensation can be rendered ineffective to mitigate agency costs when a publicly listed firm is acquired. Given these inefficiencies, a number of recommendations are made for the improvement of the design of executive compensation contracts that could provide valuable guidelines to remuneration committees to reduce excessive compensation costs and benefit shareholders.
Three Essays In Mergers And Acquisitions And Executive Compensation
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Author : Nada El-Hassan
language : en
Publisher:
Release Date : 2021
Three Essays In Mergers And Acquisitions And Executive Compensation written by Nada El-Hassan and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021 with categories.
Several studies in the finance literature (and other fields) focus on how compensation contracts of CEOs shape incentives and affect risk-taking behaviour. We examine how CEOs with varying risk appetites approach merger and acquisition (M&A) deals differently due to incentives driven by their compensation structure. Relying on VEGA, the sensitivity of executive's portfolio to a one percent change in volatility of stock returns, we document that acquirers and targets behave differently vis-à-vis their compensation. We show that a longer time to completion is related to the target VEGA (and not bidder VEGA). We also find that a more risk-taking CEO (as encouraged by VEGA) selling his firm would delay completing a deal by a significant three weeks. We conjecture that target CEOs choose to delay deal completion to look for better bids that tally their need to change their portfolio of company holdings. Next, we link executive compensation, mergers and acquisitions, and environmental, social and governance in one framework that produces new insights into how CEO's incentives yield sub-optimal investment decisions. Our sample consists of 1,280 mergers (M&A) from the period of 1993-2018 and uses the CEO's wealth sensitivity to stock price volatility (VEGA) as a proxy for risk-taking behaviour. We establish that there is a shift in the relation between CSR rating and cumulative abnormal announcement returns of M&As deals. After 2008, the market for corporate control no longer rewards more commitment to CSR activities. We examine the performance of our sample of mergers in comparison with that of a matched sample of non-bidding firms vis-à-vis their environmental, social and governance (ESG) profiles over the long term. Our results indicate that more CSR commitment does not translate into better long-term returns for shareholders and stakeholders if the firms participate in M&As. Moreover, we investigate how the bidder and target CSR ratings, as well as management risk-taking incentives (proxied by VEGA), affect deals total synergy estimated around the announcement day. Our results show that firms with lower CSR ratings yield more synergy gains, which are not related to both bidder and target risk-taking incentives. Finally, we provide new evidence related to the debate whether corporate social responsibility (CSR) strategies intrinsically benefit organizations and contribute to wealth creation after controlling for CEO compensation. We utilize a sample of M&A deals spanning the period 1993 to 2018 of target firms with different CSR ratings and investigate the effect of CEOs' executive compensation driven incentives. Our main finding is that Low CSR firms becoming targets of M&A contests in the subperiod post-2008 record the highest cumulative average abnormal returns (compared to High CSR over the same period and other subsamples). We report that Low CSR firms with High VEGA target CEOs specifically perform better in corporate control contests in later years. We justify this as Low CSR firms are characterized by lower governance and more agency costs where management seeks benefit its own interests instead of being considerate for the stakeholders at large.
Risk Return Tradeoffs And Managerial Incentives
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Author : David Tsui
language : en
Publisher:
Release Date : 2015
Risk Return Tradeoffs And Managerial Incentives written by David Tsui and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.
Moral hazard theory posits that managerial risk aversion imposes agency costs on shareholders, and firms respond by providing risk-taking incentives to mitigate these costs. The underlying assumption in this literature is that increasing shareholder value requires increasing risk, yet there is limited empirical evidence supporting this assumption or the role of such risk-return tradeoffs in incentive compensation design. Using measures based on the firm's stock price, I find that shareholder value increases with risk, consistent with managerial risk aversion imposing agency costs on shareholders. I also find that firms provide managers with more risk-taking incentives when this risk-return relation is more positive and thus potential risk-related agency costs are more severe. This finding is strongest among firms where value increases with idiosyncratic rather than systematic risk, consistent with theory that these agency costs arise primarily from managers' exposure to idiosyncratic risk. Overall, these results are consistent with firms designing managerial compensation contracts to mitigate risk-related agency costs. Additional findings highlight that the incentives from equity-based compensation depend on the risk-return tradeoffs that managers face, providing one explanation for the conflicting results in prior literature regarding the incentives from managerial stock price exposure.
2020 Mergerstat Review
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Author : FACTSET MERGERSTAT.
language : en
Publisher: BVResources
Release Date : 2020-04-25
2020 Mergerstat Review written by FACTSET MERGERSTAT. and has been published by BVResources this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020-04-25 with categories.
The FactSet Mergerstat Review is the cornerstone of any mergers and acquisitions library. This must-have resource delivers comprehensive rosters, data and statistics on merger and acquisition (M&A) transactions that involve U.S. companies, including privately held, publicly traded and cross-border transactions, and also lists unit divestitures, management buyouts, and certain asset sales.
Research Handbook On Alternative Finance
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Author : Franklin Allen
language : en
Publisher: Edward Elgar Publishing
Release Date : 2024-04-12
Research Handbook On Alternative Finance written by Franklin Allen and has been published by Edward Elgar Publishing this book supported file pdf, txt, epub, kindle and other format this book has been release on 2024-04-12 with Business & Economics categories.
Promoting a comparative perspective, this comprehensive Research Handbook aids in the understanding of alternative finance and its values in a global setting. Readers are encouraged to view alternative finance through the lens of economic mechanisms rather than terminology.
Great Minds In Management
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Author : Ken G. Smith
language : en
Publisher: OUP Oxford
Release Date : 2005-09-22
Great Minds In Management written by Ken G. Smith and has been published by OUP Oxford this book supported file pdf, txt, epub, kindle and other format this book has been release on 2005-09-22 with Business & Economics categories.
In Great Minds In Management Ken G. Smith and Michael A. Hitt have brought together some of the most influential and original thinkers in management. Their contributions to this volume not only outline their landmark contributions to management theory, but also reflect on the process of theory development, presenting their own personal accounts of the gestation of these theories. The result is not only an ambitious and original panorama of the key ideas in management theory presented by their originators, but also a unique collection of reflections on the process of theory development, an area which to date little has been written about by those who have actually had experience of building theory. In their concluding chapter, Ken G. Smith and Michael A. Hitt draw together some common themes about the development of management theory over the last half a century, and suggest some of the conclusions to be drawn about how theory comes into being. Contributors: Chris Argyris, Albert Bandura, Jay B. Barney, Lee R. Beach, Kim Cameron, Michael R. Darby, Robert Folger, R. Edward Freeman, Michael Frese, J. Richard Hackman, Donald C. Hambrick, Michael A. Hitt, Anne S. Huff, Gary P. Latham, Edwin A. Locke, Henry Mintzberg, Terrence R. Mitchell, Richard T. Mowday, Ikujiro Nonaka, Greg R. Oldham, Jeffrey Pfeffer, Lyman W. Porter, Denise M. Rousseau, W. Richard Scott, Ken G. Smith, Barry M. Staw, Richard M. Steers, Victor H. Vroom, Karl E. Weick, Oliver E. Williamson, Sidney G. Winter, and Lynn Zucker,
Eurasian Economic Perspectives
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Author : Mehmet Huseyin Bilgin
language : en
Publisher: Springer Nature
Release Date : 2020-09-28
Eurasian Economic Perspectives written by Mehmet Huseyin Bilgin and has been published by Springer Nature this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020-09-28 with Business & Economics categories.
This book presents selected papers from the 26th and 27th Eurasia Business and Economics Society (EBES) Conferences, held in Prague, Czech Republic, and Bali, Indonesia. While the theoretical and empirical papers gathered here cover diverse areas of economics and finance in various geographic regions, the main focus is on the latest research concerning banking and finance, as well as empirical studies on emerging economies and public economics. The book also includes studies on political economy and regional studies.
Agency Problems And Financial Contracting
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Author : Amir Barnea
language : en
Publisher: Prentice Hall
Release Date : 1985
Agency Problems And Financial Contracting written by Amir Barnea and has been published by Prentice Hall this book supported file pdf, txt, epub, kindle and other format this book has been release on 1985 with Business & Economics categories.
Merger Decisions
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Author : Federal Deposit Insurance Corporation
language : en
Publisher:
Release Date :
Merger Decisions written by Federal Deposit Insurance Corporation and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on with Bank mergers categories.