Recent research has shown evidence that larger firms are more likely to destroy shareholder wealth through acquisitions. Those findings suggest that managers of larger firms are less likely to be disciplined by the market for corporate control than managers of smaller firms. With a sample of nearly 8000 acquisitions over the period from 1980–1999, this paper offers evidence to the contrary. The results suggest that larger firms are more likely to be the target of a disciplinary takeover than smaller firms. Further tests indicate that CEOs of larger firms are significantly more likely to be replaced following a series of poor acquisitions than CEOs of smaller firms. In total, managers of the largest firms continue to make the worst acquisitions despite the evidence that they are more likely to be punished for doing so.

Tender offers provide the advantage of substantially faster completion times than mergers. However, a tender offer signals to the target higher demand for its shares and raises its reservation price. In equilibrium, bidders tradeoff speed and cost. Consistent with this theory, we show that deals in more competitive environments and deals with fewer external impediments on execution are more likely to be structured as tender offers. Tender offers also require higher premiums than mergers. Finally, the rivals of the bidding firm realize significantly lower announcement returns and subsequent operating performance in tender offers than in mergers.

Most extant studies consider golden parachutes as the totality of change-in-control payments. However, for the median CEO of firms listed in the S&P SmallCap 600 index in 2009, golden parachute payments are only 46% of total change-in-control compensation. We measure total change-in-control payments using newly available data for this sample. Our results show that the total payments to the departing CEO are estimated at 1.1% of market value (on average). We also show that newly earned compensation (as opposed to accelerated vesting of lagged incentive pay) makes up approximately half of total change-in-control payments for the median CEO, and these two components of severance pay are positively correlated (contrary to existing theory). Furthermore, change-in-control payments do not appear to impede takeover offers or affect takeover premiums. Total change-in-control payments are small on average, and boards seem to take care in negotiating these terms with incumbent CEOs so that change-in-control payments do not adversely affect the firm's prospects in the takeover market.

Abstract We study the value gains from takeovers of firms with poor acquisition histories. We document that the premium received by target shareholders is higher when the value loss from the targets’ prior acquisitions is larger. However, the gains to target shareholders seem to be offset by losses to acquiring shareholders. The average announcement return to acquiring shareholders is negative and decreasing in the value loss from the targets’ prior acquisitions. Additionally, the combined acquirer-target value created in these takeovers is insignificant. These results suggest that the value lost from targets’ prior acquisitions is not recovered through changes in corporate control.