Working Paper: NBER ID: w28778
Authors: Sinan Gokkaya; Xi Liu; Ren M. Stulz
Abstract: We open the black box of the M&A decision process by constructing a comprehensive sample of US firms with specialized M&A staff. We investigate whether specialized M&A staff improves acquisition performance or facilitates managerial empire building instead. We find that firms with specialized M&A staff make better acquisitions when acquisition performance is measured by stock price reactions to announcements, long-run stock returns, operating performance, divestitures, and analyst earnings forecasts. This effect does not hold when the CEO is powerful, overconfident, or entrenched. Acquisitions by firms without specialized staff do not create value, on average. We provide evidence on mechanisms through which specialized M&A staff improves acquisition performance. For identification, we use the staggered recognition of inevitable disclosure doctrine as a source of exogenous variation in the employment of specialized M&A staff.
Keywords: No keywords provided
JEL Codes: G14; G24; G30; G34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| specialized M&A staff (G34) | acquisition performance (L25) |
| specialized M&A staff (G34) | abnormal shareholder wealth gain (G34) |
| specialized M&A staff (G34) | reduced divestitures (G34) |
| specialized M&A staff (G34) | improved operating performance (L25) |