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Do Envious CEOs Cause Merger Waves?

Anand M. Goel1; Anjan V. Thakor2

1 DePaul University · 2 Washington University in St. Louis

Review of Financial Studies 2010

We develop a theory which shows that merger waves can arise even when the shocks that precipitated the initial mergers in the wave are idiosyncratic. The analysis predicts that the earlier acquisitions produce higher bidder returns, involve smaller targets, and result in higher compensation gains for the acquirer's top management team than the later acquisitions in the wave. We find strong empirical support for these predictions. The model also generates additional predictions, some of which remain to be tested.

DOI
10.1093/rfs/hhp088
Volume
23 (2)
Pages
487-517
Language
en
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