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We present a model of mergers and acquisitions based on stock market misvaluations of the combining firms. The key ingredients of the model are the relative valuations of the merging firms, the horizons of their respective managers, and the market's perception of the synergies from the...
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also suggests a theory of managerial behavior, in which hiring and entrenching trustworthy managers enables shareholders to … commit to upholding implicit contracts with stakeholders. Hostile takeovers are an innovation allowing shareholders to renege …
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