A Unified Model of Corporate Acquisitions and Divestitures
Posted: 23 Aug 1998
The purpose of this paper is to unify corporate acquisitions and divestitures (e.g., spin-offs, equity carve-outs and sell-offs) into a simple comprehensive agency model where risk and synergy (positive or negative) interact to determine an optimal corporate governance and stock-based incentive compensation. Our model explains empirical evidence regarding corporate acquisitions and divestitures and also motivates some new emprical hypotheses about the nature of stock-based compensation in spin-offs and equity carve-outs.
JEL Classification: G34, D82
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