The following study critically examines the actions and underlying incentives of public corporate governors in response to unsolicited tender offers. Using established theoretical frameworks, this thesis hypothesizes that takeover target managers and directors will tend to respond to personal financial incentives and risks in lieu of shareholder wealth concerns. Indeed, the past literature on the subject has mostly reflected this result; however, no recent study has determined conclusively if this trend is harmful to shareholders. Using methodology reflecting that of the successful past research, the empirical models test the explanatory power of the following variables on bid resistance by target firms over a sample of 64 tender offers spanning from 2004 to 2012: Hostility (defined as the intention of the bidder to replace target management), Bid Premium (the only variable of concern to shareholders), Managerial Wealth Change (a variable representing the immediate capital gains facing the top managers and directors as a result of the takeover) and Managerial Stock Ownership (as a percentage of total shares, and as the natural logarithm of total shares held by top managers and directors). The relationships highlighted by the data will be compared in their explanatory power and statistical significance to determine if shareholders, and thus the greater capital markets, should be concerned about the potential results of a misalignment of principal and agent incentives.
This study examines the influences of mergers and acquisitions (M&As) on companies' profitability and compares these influences with economic conditions to discuss their significance. It hypothesizes that market power, total assets and synergistic effects are all positively related to profitability, but they are less significant than the economic influences such as economic growth, consumer confidence and producer confidence. Focusing on the largest U.S. mergers and acquisitions during the period from 1998 to 2003, two economic models are designed to test these hypotheses. The first model examines the relationship between M&A influences and profitability. The test results of this model suggest that market power and total assets are both significant to profitability and that synergistic effects are insignificant. The study also finds that increasing market power is 50 times more efficient than increasing total assets in generating profit. The second model examines the relationship between the economic influences and profitability, but the tests results are inconclusive and suggest that economic factors and profitability have non-linear correlations
The most recent financial crisis has spurred a number of mergers and acquisitions in the financial industry, specifically banks. This study examines the hypothesis that mergers and acquisitions did not produce better performing institutions and industries during the 2006-2008 period. The key theories behind this hypothesis are valuation theory and performance measurement theory. Data were compiled for six banking ratios for 105 firms directly involved in mergers or acquisitions during this period. An empirical test of firm-to-firm performance shows that firms did not benefit from the mergers for the majority of ratios tested. On the other hand, firm to industry performance shows mixed results, with many of the ratios tested resulting to be statistically insignificant. These results reveal the inefficiencies of mergers and acquisitions and support the hypothesis of this study.
Mergers and acquisitions create situations where target CEOs may not act in the best interest of the shareholders. Further, the type of financing used in these acquisitions skew incentives in differing ways and may depend on market conditions. Using quantitative analysis this paper explores the relationship between managerial horizons of target firms and acquisition payment methods. Specifically, it is anticipated that more stock use coincides with shorter managerial decision-making horizons of target firms.