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Synergy, Agency, and the Determinants of Premia Paid in Mergers

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  • Slusky, Alexander R
  • Caves, Richard E
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    Abstract

    Hypotheses about the creation of value by mergers are tested on premia paid in a sample of one hundred recent acquisitions. The premia increase with financial, although not with real, synergies and with the scope for "managerial" behavior in the target firms. The acquirers' willingness to pay also increases with their scope for managerial behavior. The presence of either actual and potential rival bidders has a powerful effect, and the authors ascertain that market gains (losses) to acquirers' shareholders do not distort the associations between acquisition premia and sources of value. Copyright 1991 by Blackwell Publishing Ltd.

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    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Journal of Industrial Economics.

    Volume (Year): 39 (1991)
    Issue (Month): 3 (March)
    Pages: 277-96

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    Handle: RePEc:bla:jindec:v:39:y:1991:i:3:p:277-96

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    Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-1821

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    Cited by:
    1. Díaz Díaz, Belén & Sanfilippo Azofra, Sergio & López Gutiérrez, Carlos, 2013. "Synergies or overpayment in European corporate M&A," MPRA Paper 51070, University Library of Munich, Germany.
    2. Desai, Ashay & Kroll, Mark & Wright, Peter, 2005. "Outside board monitoring and the economic outcomes of acquisitions: a test of the substitution hypothesis," Journal of Business Research, Elsevier, vol. 58(7), pages 926-934, July.
    3. Ferguson, Michael F, 1994. "Ownership Structure, Potential Competition, and the Free-Rider Problem in Tender Offers," Journal of Law, Economics and Organization, Oxford University Press, vol. 10(1), pages 35-62, April.
    4. Shelton, Lois M., 2000. "Merger market dynamics: insights into the behavior of target and bidder firms," Journal of Economic Behavior & Organization, Elsevier, vol. 41(4), pages 363-383, April.
    5. Ralph M. Sonenshine, 2009. "The Stock Market's Valuation of Research and Development and Market Concentration in Horizontal Mergers," Working Papers 2009-12 JEL classificatio, American University, Department of Economics.
    6. Mahendra Raj & Michael Forsyth, 2004. "Management Motive, Shareholder Returns, and the Choice of Payment: Evidence from the UK," American Journal of Business, Emerald Group Publishing, vol. 19(1), pages 23-30.
    7. Flanagan, David J. & O'Shaughnessy, K. C., 2003. "Core-related acquisitions, multiple bidders and tender offer premiums," Journal of Business Research, Elsevier, vol. 56(8), pages 573-585, August.
    8. Park, Minjung, 2013. "Understanding merger incentives and outcomes in the US mutual fund industry," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4368-4380.
    9. Jorge Farinha & Francisco Miranda, 2003. "Run-up, toeholds, and agency effects in mergers and acquisitions: evidence from an emerging market," CEF.UP Working Papers 0311, Universidade do Porto, Faculdade de Economia do Porto.
    10. Haller, Lawrence E., 1995. "The Effects of the Beatrice-Conagra Merger on Brand-level Marketing Strategies," Research Reports 25186, University of Connecticut, Food Marketing Policy Center.
    11. Andy Cosh & Paul Guest & Alan Hughes, 2007. "UK Corporate Governance and Takeover Performance," ESRC Centre for Business Research - Working Papers wp357, ESRC Centre for Business Research.
    12. Brau, James C. & Sutton, Ninon K. & Hatch, Nile W., 2010. "Dual-track versus single-track sell-outs: An empirical analysis of competing harvest strategies," Journal of Business Venturing, Elsevier, vol. 25(4), pages 389-402, July.
    13. Malhotra, Shavin & Zhu, PengCheng, 2013. "Paying for cross-border acquisitions: The impact of prior acquirers’ decisions," Journal of World Business, Elsevier, vol. 48(2), pages 271-281.

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