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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Year of publication:	2014
Authors:	Kräkel, Matthias ; Müller, Daniel
Publisher:	Bonn : University of Bonn, Bonn Graduate School of Economics (BGSE)
Subject:	acquisition \| merger \| moral hazard

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Series:	Bonn Econ Discussion Papers ; 02/2014
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	847869970 [GVK] hdl:10419/128614 [Handle] RePEc:zbw:bonedp:022014 [RePEc]
Classification:	D82 - Asymmetric and Private Information ; D86 - Economics of Contract: Theory ; G34 - Mergers; Acquisitions; Restructuring; Corporate Governance
Source:	EconStor

Persistent link: https://www.econbiz.de/10011434940