Managerial horizons in stock financed mergers

Sharma, Vaibhav; Hsieh, Chialing

doi:10.1016/j.qref.2011.01.002

Cited by 3 publications

(7 citation statements)

References 33 publications

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“…Huang (2011) finds that managers with short horizons buy back shares even after the share price has gone up, implying that retiring executives want to boost the share price for personal gains. In merger and acquisition activity, it has been documented that acquirer CEOs have longer decision horizons than target firm CEOs in stock financed mergers (Gao, 2010; Sharma and Hsieh, 2011). In sum, there is ample evidence that CEOs with short horizons are less concerned about the long-run performance of the firm and are myopic in firm decisions.…”

Section: Related Literature and The Measurement Of Mdhmentioning

confidence: 99%

“…Prior studies frequently measure managerial horizon by the age and tenure of the CEO. A number of researchers, however, report that managerial horizon is significantly related to the characteristics of executive compensation (Narayanan, 1996; Sharma and Hsieh, 2011; Ladika and Sautner, 2014). Therefore, we expand the measure of managerial horizon to include the effect of executive compensation; and we rename it MDH (Narayanan, 1996; Sharma and Hsieh, 2011).…”

Section: Related Literature and The Measurement Of Mdhmentioning

confidence: 99%

“…In short, managerial horizon measured by CEO age and CEO tenure has been associated with inconsistent results. In recent studies, researchers find evidence that managerial horizon is also affected by CEO compensation (Narayanan, 1996; Sharma and Hsieh, 2011; Ladika and Sautner, 2014). Thus, in this study, we expand the number of proxies and measure managerial horizon by CEO age, CEO tenure, cash compensation relative to total compensation, and the amount of vested equity-based compensation to total compensation.…”

Section: Introductionmentioning

confidence: 99%

“…Specifically, we rank each variable and aggregate the individual rankings to come up with a comprehensive measure of managerial horizon for each firm in each year. Similar to Narayanan (1996) and Sharma and Hsieh (2011), we name our measure managerial decision horizon (MDH). A short MDH means that the CEO is closer to retirement, has a longer tenure, and has a larger percentage of cash compensation and a higher amount of vested equity-based compensation.…”

Section: Introductionmentioning

confidence: 99%

“…Bushee (1998) finds that institutional ownership has a significant impact in mitigating myopic firm investment activity; the effect of corporate governance has not been considered in prior studies on managerial horizon (Bouwens and van Lent, 2007; Kalyta, 2009; Gao, 2010; Sharma and Hsieh, 2011; Huang, 2011; Ladika and Sautner, 2014). Our study adds to the literature on managerial horizon by incorporating the effect of the board of directors.…”

Section: Introductionmentioning

confidence: 99%

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Managerial decision horizon and real estate investment trusts (REITs)

Yung

Jian

2017

RBF

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Purpose The purpose of this paper is to examine the effects of managerial decision horizon (MDH) on real estate investment trust (REIT) behavior and performance. Design/methodology/approach In this study, the authors expand the number of proxies and measure managerial horizon by CEO age, CEO tenure, cash compensation relative to total compensation, and the amount of vested equity-based compensation to total compensation. To avoid potential measurement error, the authors compute the average ranking score of the four individual measures to determine the overall MDH of a CEO. Cross-sectional time series regressions are then performed on the effects of CEO MDH on REIT policies and performance. The authors also examine if the effect of myopic MDH can be mitigated by good corporate governance. For robustness purpose, the authors also compare the effects of age-related MDH and compensation-related MDH. Findings The results show that REITs managed by CEOs with short MDHs have lower levels of asset growth and a lower standard deviation of return on assets. These REITs also have lower debt levels, lower dividend payouts, and hold more cash. The results suggest that short-horizon CEOs have incentives to lower investment risk, default risk, and liquidity risk at the firm level in order to protect personal benefits. CEOs with a short horizon also have a negative impact on REIT performance. The results also show that CEO compensation-related horizon problems are mitigated by corporate governance, but CEO age-related horizon problems are significant and persistent. The results suggest that age-related behavioral biases of the CEO are important determinants of corporate decisions. Practical implications The results of this study suggest that the managerial behavioral biases should be considered in understanding firm behavior. Originality/value This is the first study that examines the effects of MDH on REIT behavior and performance. The unique regulatory environment of REITs makes them less susceptible to agency problems of free cash flow and thus provides a clearer picture of the effect of MDH. Prior studies focus on the effect of managerial horizon on firm investment activity, this study expands the scope to examine the effects on investment and financial policies. In addition, this study adds to the literature by showing that the effect of age-related horizon problems may not be mitigated by good corporate governance.

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Section: Related Literature and The Measurement Of Mdhmentioning

confidence: 99%

Section: Related Literature and The Measurement Of Mdhmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

Managerial decision horizon and real estate investment trusts (REITs)

Yung

Jian

2017

RBF

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The effect of managerial horizon on cash holdings

Guha

Rahim

2019

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Purpose US corporations are now sitting on an enormous stockpile of cash. Instead of investing their resources and creating jobs, the firms are holding on to excess cash. Academicians and practitioners alike have tried to fathom the reasons why companies are holding on to so much cash. Numerous studies have talked about the various motives for holding cash. Many researchers have tried to correlate excess cash holding with particular firm characteristics. The purpose of this paper is to study the correlations that exist between excess cash holding and some measurable managerial characteristics. Design/methodology/approach Four different measures of managerial horizon (MH) were constructed. The first two constructs (MH1 and MH2) are based on the CEO’s age and how long he has been the CEO of the company. The next two constructs (MH3 and MH4) are based on compensation, proportion of current compensation and proportion of future compensation. This paper tries to examine if MH has any impact on excess cash holding. Findings The results clearly show that the CEO age and the proportion of CEO’s compensation (current and future) do determine level of cash holding in the company. Younger CEOs hold more cash compared to older CEOs. Older CEOs hold less cash suggesting that as CEOs grow older they might be motivated by the idea of leaving a long lasting legacy. CEOs who receive more of their compensation in future payments also hold on to more cash, whereas CEOs who receive more of their compensation in current payments hold less cash. Originality/value There is no previous literature dealing with MH and cash holding by corporations.

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Emerging Market Bidder Returns and the Choice of Payment Method in M&A: Evidence from India

Ladkani

Banerjee

2012

SSRN Journal

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Managerial horizons in stock financed mergers

Cited by 3 publications

References 33 publications

Managerial decision horizon and real estate investment trusts (REITs)

Managerial decision horizon and real estate investment trusts (REITs)

The effect of managerial horizon on cash holdings

Emerging Market Bidder Returns and the Choice of Payment Method in M&A: Evidence from India

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