Abstract

http://ssrn.com/abstract=1562247
 
 

References (241)



 
 

Citations (19)



 


 



The Sources of Value Destruction in Acquisitions by Entrenched Managers


Jarrad Harford


University of Washington

Mark Humphery-Jenner


UNSW Australian School of Business; Financial Research Network (FIRN)

Ronan Powell


Dublin City University; University of New South Wales (UNSW) - School of Banking and Finance; Financial Research Network (FIRN)

2012

Journal of Financial Economics (JFE), Vol. 106, No. 2, 2012

Abstract:     
Prior work has established that entrenched managers make value-decreasing acquisitions. In this study, we ask how exactly 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 actually 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.

Number of Pages in PDF File: 43

Keywords: Corporate Governance, Mergers, Entrenchment, Overvalued Equity, Overpayment

JEL Classification: G32, G34

working papers series


Download This Paper

Date posted: March 2, 2010 ; Last revised: August 30, 2012

Suggested Citation

Harford, Jarrad and Humphery-Jenner, Mark and Powell, Ronan, The Sources of Value Destruction in Acquisitions by Entrenched Managers (2012). Journal of Financial Economics (JFE), Vol. 106, No. 2, 2012. Available at SSRN: http://ssrn.com/abstract=1562247 or http://dx.doi.org/10.2139/ssrn.1562247

Contact Information

Jarrad Harford
University of Washington ( email )
Box 353226
Seattle, WA 98195-3226
United States
206-543-4796 (Phone)
206-543-7472 (Fax)
HOME PAGE: http://faculty.washington.edu/jarrad/
Mark Humphery-Jenner (Contact Author)
UNSW Australian School of Business ( email )
Sydney, NSW 2052
Australia

Financial Research Network (FIRN)
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia
HOME PAGE: http://www.firn.org.au

Ronan G. Powell
Dublin City University ( email )
Ireland 9
Dublin 9, leinster 9
Ireland
University of New South Wales (UNSW) - School of Banking and Finance ( email )
Sydney, NSW 2052
Australia

Financial Research Network (FIRN) ( email )
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Feedback to SSRN


Paper statistics
Abstract Views: 2,776
Downloads: 670
Download Rank: 19,435
References:  241
Citations:  19

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo5 in 0.781 seconds