Do Firms with Specialized M&A Staff Make Better Acquisitions?

81 Pages Posted: 5 May 2021

See all articles by Sinan Gokkaya

Sinan Gokkaya

Department of Finance, Ohio University

Xi Liu

Miami University of Ohio - Richard T. Farmer School of Business Administration

René M. Stulz

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Date Written: April 30, 2021

Abstract

We open the black box of the M&A decision process by constructing a comprehensive sample of US firms with specialized M&A staff. We investigate whether specialized M&A staff improves acquisition performance or facilitates managerial empire building instead. We find that firms with specialized M&A staff make better acquisitions when acquisition performance is measured by stock price reactions to announcements, long-run stock returns, operating performance, divestitures, and analyst earnings forecasts. This effect does not hold when the CEO is powerful, overconfident, or entrenched. Acquisitions by firms without specialized staff do not create value, on average. We provide evidence on mechanisms through which specialized M&A staff improves acquisition performance. For identification, we use the staggered recognition of inevitable disclosure doctrine as a source of exogenous variation in the employment of specialized M&A staff.

Keywords: Mergers and acquisitions, acquisitions, corporate takeover market, corporate development, M&A staff

JEL Classification: G30, G34, G14, G24

Suggested Citation

Gokkaya, Sinan and Liu, Xi and Stulz, Rene M., Do Firms with Specialized M&A Staff Make Better Acquisitions? (April 30, 2021). Fisher College of Business Working Paper No. 2021-03-006, Charles A. Dice Working Paper No. 2021-006, European Corporate Governance Institute – Finance Working Paper No. 778/2021, Available at SSRN: https://ssrn.com/abstract=3840238 or http://dx.doi.org/10.2139/ssrn.3840238

Sinan Gokkaya

Department of Finance, Ohio University ( email )

207 Muck College of Business
Athens, OH 45701
United States

HOME PAGE: http://business.ohio.edu/about/faculty-staff/gokkaya-sinan/

Xi Liu

Miami University of Ohio - Richard T. Farmer School of Business Administration ( email )

Oxford, OH 45056
United States

Rene M. Stulz (Contact Author)

Ohio State University (OSU) - Department of Finance ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

HOME PAGE: http://www.cob.ohio-state.edu/fin/faculty/stulz

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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