Purpose - The purpose of this research paper is to clarify why shareholders should be prudent when managers promise value gains from a synergetic merger. Design/methodology/approach -The paper proposes a simple two-state model of stochastic firm cash flows which allows for a discussion of wealth...

Purpose - The purpose of this research paper is to clarify why shareholders should be prudent when managers promise value gains from a synergetic merger. Design/methodology/approach -The paper proposes a simple two-state model of stochastic firm cash flows which allows for a discussion of wealth...

Purpose – The purpose of this research paper is to clarify why shareholders should be prudent when managers promise value gains from a synergetic merger. Design/methodology/approach – The paper proposes a simple two‐state model of stochastic firm cash flows which allows for a discussion of...