Do Managerial Objectives Drive Bad Acquisitions?

Morck, Randall; Shleifer, Andrei; Vishny, Robert W.

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Do Managerial Objectives Drive Bad Acquisitions?

Journal of Finance. 45(1) 31-48, March 1990

University of Alberta School of Business Research Paper No. 2013-635

Posted: 8 Jun 2013

See all articles by Randall Morck

Randall Morck

University of Alberta - Department of Finance and Statistical Analysis; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); Asian Bureau of Finance and Economic Research

Andrei Shleifer

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Robert W. Vishny

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

There are 2 versions of this paper

Date Written: March 7, 1989

Abstract

In a sample of 326 US acquisitions between 1975 and 1987, three types of acquisitions have systematically lower and predominantly negative announcement period returns to bidding firms. The returns to bidding shareholders are lower when their firm diversifies, when it buys a rapidly growing target, and when its managers performed poorly before the acquisition. These results suggest that managerial objectives may drive acquisitions that reduce bidding firms' values.

Suggested Citation: Suggested Citation

Morck, Randall K. and Shleifer, Andrei and Vishny, Robert W., Do Managerial Objectives Drive Bad Acquisitions? (March 7, 1989). Journal of Finance. 45(1) 31-48, March 1990, University of Alberta School of Business Research Paper No. 2013-635, Available at SSRN: https://ssrn.com/abstract=2276211