Merger efficiency and managerial incentives

CEO age, shareholder monitoring, and the organic growth of European firms

“…As EFIGE is a cross-sectional survey, we cannot employ an identification strategy based on changes in the longitudinal dimension of the CEO age variable. Nonetheless, we control for different time horizons over 4 While high-profile M&As may ideally boost both revenue and earnings per share (Ahuja et al, 2017), the evidence of a positive effect of M&As on the shareholders' value of the acquiring firm is mixed (see Andrade et al, 2001;Kräkel & Müller, 2015) 5 Past studies have attributed younger CEOs' engagement in strategies such as M&As (Li et al, 2017;Yim, 2013), R&D investments (Serfling, 2014), and internationalization (Serra et al, 2012) to their superior risk-taking behavior 6 Indeed, managers may over-invest, to signal that their firm's present value is high, when markets are imperfectly informed about the firm's long-run projects and executives are concerned mainly with short-run evaluations (Bebchuck & Stole, 1993). Moreover, when the stock market is imperfectly informed about managerial ability, strategies aimed at pumping up current figures may be adopted by the managers, such as devoting efforts to raise current sales volumes at the expense of improving profit margins (Aghion & Stein, 2008) which growth rates are calculated, to minimize the risk of biased results due to the (unobserved) turnover of CEOs.…”

Competitors in merger control: Shall they be merely heard or also listened to?

“…21 Farrell (2012, p.22) stresses that "industries and their participants are endlessly idiosyncratic". Examples of such aspects are collusion (Miller and Weinberg 2014), quantity versus price competition (Salant et al 1983;Deneckere and Davidson 1985), synergies (Banerjee and Eckard 1998;Farrell and Shapiro 2001), integration cost (Huck et al 2004), internal capital-allocation (Mialon 2008), strategic market power (Huck et al 2001), internal conflict (Banal-Estañol et al 2008), managerial incentives (Faulí-Oller and Motta 1996Kräkel and Müller 2015), managerial synergies (Matsusaka 1993), entry and exit (Davidson and Mukherjee 2007), managerial hubris (Roll 1986), technology (Lahiri and Ono 1988), firm-internal competition (Creane and Davidson 2004), multi-market presence (Werden et al 1991), learning (Vermeulen and Barkema 2001), union organization (Lommerud et al 2001) or uncertainty (Amir et al 2009). See Datta et al (1992) for a meta-analysis.…”

Competitors in Merger Control: Shall They Be Merely Heard or Also Listened to?

“…Moreover, there is a large theoretical and empirical literature on mergers reporting very diverse effects with respect to welfare as well as insider and outsider profits depending on which aspects are relevant for a given merger. Examples of such aspects are collusion (Miller and Weinberg, 2014), quantity vs. price competition (Salant et al, 1983, Deneckere andDavidson, 1985), synergies (Banerjee andEckard, 1998, Farrell andShapiro, 2001), integration cost (Huck et al, 2004), internal capital-allocation (Mialon, 2008), strategic market power (Huck et al, 2001), internal conflict (Banal-Estañol et al, 2008), managerial incentives (Faulí-Oller andMotta, 1996, Kräkel andMüller, 2014), managerial synergies (Matsusaka, 1993), entry and exit (Davidson and Mukherjee, 2007), managerial hubris (Roll, 1986), technology (Lahiri and Ono, 1988), firm-internal competition (Creane and Davidson, 2004), multi-market presence (Werden et al, 1991), learning (Vermeulen and Barkema, 2001), union organization (Lommerud et al, 2001) or uncertainty (Amir et al, 2009). See Datta et al (1992) for a meta-analysis.…”