Management as the sine qua non for M&A Success
99 Pages Posted: 13 Sep 2017 Last revised: 6 Dec 2020
Date Written: December 5, 2020
This paper studies whether management quality in acquiring firms determines merger and acquisition (M&A) success. We model management practices as an unobserved (latent) variable in a standard microeconomic model of the firm and derive firm-year management estimates. We show that our measure is among the most important determinants of value creation in M&A deals. Our results are robust to the inclusion of acquirer fixed effects, to a large set of control variables, and to several other sensitivity tests. We also show that management explains, albeit to a lesser extent, acquirers’ return on equity and Tobin’s q.
Keywords: Mergers and acquisitions, Management practices, Acquirer returns
JEL Classification: G14, G34, J24
Suggested Citation: Suggested Citation