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

75 Pages Posted: 10 May 2021 Last revised: 18 Nov 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 Stulz

Ohio State University (OSU) - Fisher College of Business

Date Written: May 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.

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Suggested Citation

Gokkaya, Sinan and Liu, Xi and Stulz, René, Do Firms with Specialized M&A Staff Make Better Acquisitions? (May 2021). Available at SSRN: https://ssrn.com/abstract=3842753 or http://dx.doi.org/10.2139/ssrn.3842753

Sinan Gokkaya (Contact Author)

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

René Stulz

Ohio State University (OSU) - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

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