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Proximity with affinity: How M&A top executives could exacerbate agency conflicts?

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  • Jean-Gabriel Cousin
  • Marion Dupire
  • Jean-Yves Filbien

Abstract

In this paper, we investigate the value creation for bidders of having a top executive dedicated to external growth. Using a sample of 10,777 US deals between 1993 and 2021, our results show that the presence of an M&A top executive is negatively associated with bidder gains. We explore the underlying mechanisms for this result and find evidence of agency effects: the negative effect of M&A top executives is more pronounced for mega deals and firms where the CEO is also chairman of the board. This result supports the idea that when the M&A team is headed by a top executive, his interests are more aligned with the CEO, which can amplify the agency problems associated with weak internal governance. We also explore other drivers such as overconfidence or mispricing but find no evidence of any behavioral mechanism underlying our results. JEL codes: G14, G34.

Suggested Citation

  • Jean-Gabriel Cousin & Marion Dupire & Jean-Yves Filbien, 2023. "Proximity with affinity: How M&A top executives could exacerbate agency conflicts?," Finance, Presses universitaires de Grenoble, vol. 44(3), pages 109-153.
    • Handle: RePEc:cai:finpug:fina_pr_023
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    More about this item

    Keywords

    Mergers and acquisitions; Acquirer performance; Top executive;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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