Do Managerial Incentives Affect Mergers and Acquisitions?
Date
2015-09-04
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
ORCID
Type
Degree Level
Masters
Abstract
This thesis investigates how CEO risk taking incentives related to compensation in the form of executive stock options affect the decision to engage in merger and acquisition (M&A) activities with particular attention to same-industry versus cross-industry acquisitions. Risk taking incentives increase the propensity of M&As, especially for same-industry M&As. Furthermore, risk taking incentives increase the likelihood of cash payment for both same and cross-industry acquisitions. We do not find a significant direct stock price response difference between same-industry and cross-industry acquiring firms. The market responds favorably when risk taking incentives are higher for both same-industry acquisitions and cross-industry takeovers. We further find that the acquiring firm’s post-acquisition cash flow volatility is also positively related to risk taking incentives for both same- and cross-industry M&As.
Description
Keywords
Managerial incentives, Risk-taking, Mergers and acquisitions, Cash flow volatility
Citation
Degree
Master of Science (M.Sc.)
Department
Edwards School of Business
Program
Finance