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Mergers and CEO Power

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Author Info
Felipe Balmaceda
Abstract

I propose a model of mergers in which synergies and CEO power play a crucial role. A merger is modeled as a bargaining game between the acquiring and the target board of directors, with the gains from a merger divided according to the generalized Nash bargaining solution. The model's implications are consistent with the available empirical evidence on stock returns, and yield some new untested implications that are mainly related to the relationship between CEO power, corporate governance, and mergers. Finally, the model sheds light on the relationship between aggregate merger activity, synergies, and CEO power.

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Publisher Info
Article provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.

Volume (Year): 165 (2009)
Issue (Month): 3 (September)
Pages: 454-486
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Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200909)165:3_454:macp_2.0.tx_2-j

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Find related papers by JEL classification:
G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior

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This page was last updated on 2009-12-3.

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