Market Misvaluation, Managerial Horizon, and Acquisitions
"This paper analyzes the impact of managerial horizon on mergers and acquisitions activity. The main predication is that acquiring firms managed by short-horizon executives have higher abnormal returns at acquisition announcements, less likelihood of using equity to pay for the transactions, and inferior postmerger stock performance in the long run. I construct two proxies for managerial horizon based on the CEO's career concern and compensation scheme, and provide empirical evidence supporting the above prediction. Moreover, I also demonstrate that long-horizon managers are more likely to initiate acquisitions in response to high stock market valuation." Copyright (c) 2010 Financial Management Association International.
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Volume (Year): 39 (2010)
Issue (Month): 2 (06)
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