Management Practices and Takeover Decisions

27 Pages Posted: 29 Jun 2021

See all articles by Manthos D. Delis

Manthos D. Delis

Montpellier Business School

Pantelis Kazakis

University of Glasgow - Adam Smith Business School

C. Zopounidis

Technical University of Crete (TUC) - Department of Production Engineering and Management

Date Written: June 17, 2021

Abstract

Firms with good management practices optimize and synthesize human resources, leadership, and technical and conceptual skills to enhance firm value. In this paper, we examine the role of management practices in merger and acquisition (M&A) decisions. M&A decisions are among the most important corporate decisions, on which firms spend a lot of resources and managerial qualities. We estimate management practices as a latent variable using a structural equation production model and Bayesian techniques. The key advantage of the Bayesian approach is the use of informative priors from survey-based management estimation methods, which are however available for a limited number of firms. Subsequently, we examine the effect of management practices on takeover events. We first show that management practices, on average, increase the probability of M&A deals. However, we also uncover a nonlinear U-shaped effect, which is consistent with the theoretical premise that poor management leads to many value-decreasing M&A deals, whereas good management leads to many value-increasing M&A deals.

Keywords: OR in corporate finance, Management practices, Bayesian methods, Mergers and acquisitions, Nonlinear models

JEL Classification: G14, G34, C11, C30

Suggested Citation

Delis, Manthos D. and Kazakis, Pantelis and Zopounidis, Constantin, Management Practices and Takeover Decisions (June 17, 2021). Available at SSRN: https://ssrn.com/abstract=3868806 or http://dx.doi.org/10.2139/ssrn.3868806

Manthos D. Delis

Montpellier Business School ( email )

2300 Avenue des Moulins
Montpellier, 34080
France

Pantelis Kazakis (Contact Author)

University of Glasgow - Adam Smith Business School ( email )

Adam Smith Business School
Gilbert Scott Building
Glasgow, Scotland G12 8QQ
United Kingdom

HOME PAGE: http://sites.google.com/site/panteliskazakis/home

Constantin Zopounidis

Technical University of Crete (TUC) - Department of Production Engineering and Management ( email )

University Campus
Chania
Crete, 73100
Greece
+30 28210 37236 (Phone)
+30 28210 69410, 37236 (Fax)

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