Do Firms with Specialized M&A Staff Make Better Acquisitions? / Sinan Gokkaya, Xi Liu, René M. Stulz.

Format:

Book

Author/Creator:

Gokkaya, Sinan.

Contributor:

National Bureau of Economic Research.

Liu, Xi.

Stulz, René M.

Series:

Working Paper Series (National Bureau of Economic Research) no. w28778.

NBER working paper series no. w28778

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2021.

Summary:

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.

Notes:

Print version record

May 2021.