Fortune Favors the Bold

49 Pages Posted: 6 Oct 2013 Last revised: 2 Feb 2016

See all articles by Costanza Meneghetti

Costanza Meneghetti

West Virginia University

Ryan Williams

University of Arizona - Department of Finance

Date Written: September 12, 2015


We investigate whether incentives to join the Fortune 500 affect corporate decisions. Firms closer to the cutoff appear to take actions to join the list by engaging in more M&A activity, bidding for larger targets, and paying higher takeover premia. Further, the relation is stronger for firms with more-entrenched CEOs and the stock market reaction to bids is worse when bidders are close to Fortune’s cutoff. A 1994 methodological change by Fortune acts as an exogenous shock for identification. Our results suggest that firms try to increase revenues to join the Fortune 500 but that such actions adversely affect shareholders.

Keywords: Agency problems, Executive incentives, Mergers and acquisitions

JEL Classification: G30, J33

Suggested Citation

Meneghetti, Costanza and Williams, Ryan, Fortune Favors the Bold (September 12, 2015). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming. Available at SSRN: or

Costanza Meneghetti

West Virginia University ( email )

PO Box 6025
Morgantown, WV 26506
United States
304-293-7889 (Phone)

Ryan Williams (Contact Author)

University of Arizona - Department of Finance ( email )

McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States

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