Merger Performance and Managerial Incentives

We consider a two-stage principal-agent model with limited liability in which a CEO is employed as agent to gather information about suitable merger targets and to manage the merged corporation in case of an acquisition. Our results show that the CEO systematically recommends targets with low synergies—even when targets with high synergies are available—to obtain high-powered incentives and, hence, a high personal income at the merger-management stage.

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Authors:	Kräkel, Matthias ; Müller, Daniel
Institutions:	University of Bonn, Germany
Subject:	acquisition \| merger \| moral hazard

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Extent:	application/pdf
Series:	Bonn Econ Discussion Papers.
Type of publication:	Book / Working Paper
Notes:	3 pages long
Classification:	D82 - Asymmetric and Private Information ; D86 - Economics of Contract: Theory ; G34 - Mergers; Acquisitions; Restructuring; Corporate Governance
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10011074874