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Do Managerial Objectives Drive Bad Acquisitions?

25 Pages Posted: 14 Apr 2007 Last revised: 30 Jan 2013

Randall Morck

National Bureau of Economic Research (NBER); University of Alberta - Department of Finance and Statistical Analysis

Andrei Shleifer

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Robert W. Vishny

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

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Date Written: June 1989

Abstract

This paper documents for a sample of 327 US acquisitions between 1975 and 1987 three forces that systematically reduce the announcement day return of bidding firms. The returns to bidding shareholders are lower when their firm diversifies, when it buys a rapidly growing target , and when the performance of its managers has been poor before the acquisition. These results are consistent with the proposition that managerial rather than shareholders' objectives drive bad acquisitions.

Suggested Citation

Morck, Randall and Shleifer, Andrei and Vishny, Robert W., Do Managerial Objectives Drive Bad Acquisitions? (June 1989). NBER Working Paper No. w3000. Available at SSRN: https://ssrn.com/abstract=979724

Randall Morck (Contact Author)

National Bureau of Economic Research (NBER)

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Andrei Shleifer

Harvard University - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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United States

European Corporate Governance Institute (ECGI)

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Robert Vishny

University of Chicago - Booth School of Business ( email )

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312-702-0118 (Fax)

National Bureau of Economic Research (NBER)

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