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Corporate Governance and Merger Activity in the United States: Making Sense of the 1980s and 1990s


  • Bengt Holmstrom
  • Steven N. Kaplan


This paper describes and considers explanations for changes in corporate governance and merger activity in the United States since 1980. Corporate governance in the 1980s was dominated by intense merger activity distinguished by the prevalence of leveraged buyouts (LBOs) and hostility. After a brief decline in the early 1990s, substantial merger activity resumed in the second half of the decade, while LBOs and hostility did not. Instead, internal corporate governance mechanisms appear to have played a larger role in the 1990s. We conclude by considering whether these changes and the movement toward shareholder value are likely to be permanent.

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  • Bengt Holmstrom & Steven N. Kaplan, 2001. "Corporate Governance and Merger Activity in the United States: Making Sense of the 1980s and 1990s," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 121-144, Spring.
  • Handle: RePEc:aea:jecper:v:15:y:2001:i:2:p:121-144 Note: DOI: 10.1257/jep.15.2.121

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    References listed on IDEAS

    1. Holmstrom, Bengt, 1989. "Agency costs and innovation," Journal of Economic Behavior & Organization, Elsevier, vol. 12(3), pages 305-327, December.
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    5. John G. Matsusaka, 1993. "Takeover Motives during the Conglomerate Merger Wave," RAND Journal of Economics, The RAND Corporation, vol. 24(3), pages 357-379, Autumn.
    6. Meyer, Margaret & Milgrom, Paul & Roberts, John, 1992. "Organizational Prospects, Influence Costs, and Ownership Changes," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 1(1), pages 9-35, Spring.
    7. Servaes, Henri, 1994. "Do Takeover Targets Overinvest?," Review of Financial Studies, Society for Financial Studies, vol. 7(2), pages 253-277.
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    12. Marais, Laurentius & Schipper, Katherine & Smith, Abbie, 1989. "Wealth effects of going private for senior securities," Journal of Financial Economics, Elsevier, vol. 23(1), pages 155-191, June.
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    14. Raghuram G. Rajan & Luigi Zingales, 1998. "The Governance of the New Enterprise," CRSP working papers 487, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
    15. Kaplan, Steven N., 1994. "Campeau's acquisition of Federated : Post-bankruptcy results," Journal of Financial Economics, Elsevier, vol. 35(1), pages 123-136, February.
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    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance


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