M&A Deal Initiation and Managerial Motivation

55 Pages Posted: 22 Jan 2016 Last revised: 14 Oct 2017

See all articles by Jana P. Fidrmuc

Jana P. Fidrmuc

Warwick Business School - Finance Group

Chunling Xia

Queen Mary University of London

Date Written: February 7, 2017

Abstract

This paper contributes to our understanding of managers' motivations for initiating the sale of their company. Using a sample of 1,098 publicly-listed US target firms with completed deals, we show that deals initiated by the target firm rather than by outside bidders have higher CEO ownership. Furthermore, CEOs are motivated to offer their firms for sale also by higher golden parachutes, stock and stock option grants prior to takeovers. Our results suggest that motivated CEOs participate actively in deal negotiations, rather than being bribed not to resist the deal. In target-initiated deal firms, CEO ownership and equity grants are also positively correlated with takeover premiums.

Keywords: Mergers and acquisitions; Deal initiation; Financial constraints; Managerial motivation

JEL Classification: G34

Suggested Citation

Fidrmuc, Jana P. and Xia, Chunling, M&A Deal Initiation and Managerial Motivation (February 7, 2017). Journal of Corporate Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2719561 or http://dx.doi.org/10.2139/ssrn.2719561

Jana P. Fidrmuc (Contact Author)

Warwick Business School - Finance Group ( email )

Warwick Business School
Coventry CV4 7AL
United Kingdom

Chunling Xia

Queen Mary University of London ( email )

School of Business and Management
Mile End Road
London, E1 4NS
United Kingdom

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