firms acquiring target firms
headquartered in the European Union.
We document significant differences in executive compensation structures between acquiring and target firms
before the merger.
The sample comprises acquiring and target firms
involved in acquisitions occurring during the period 1979 through 1988 (see Table 1).
Do institutional investors, through their stock ownership in target firms
, facilitate, hinder or play no role in takeovers?
Our focus on the effect of Supreme Court rulings on target firms
rather than (or in addition to) the effect on acquiring firms is based on a large body of literature that indicates that merger announcements do not have a statistically significant effect on the value of the acquiring firms, on average.
need not possess a synergy for this result to hold; they merely need inferior management.
Studies examining specific resistance tactics indicate that some defensive responses may increase the value of target firms
(Jarrell, 1985), whereas others appear to reduce their value (Bradley & Wakeman, 1983; Dann & DeAngelo, 1983; Mikkelson & Ruback, 1988).
Then, a hundred games are played by different acquirers and target firms
, which are also picked at random from the pool of thousand players.
In addition, regressions were run for both acquiring and target firms
They also investigate the replacement of top management (CEO or president) in target firms
and conclude that replacing management at target firms
is not a major objective of acquisition.
We find that target firms
experience an average of +18.
Risks: Professional liability claims are more likely if a target firm
does not value quality controls.