Do Managerial Incentives Affect Mergers and Acquisitions?
This thesis investigates how CEO risk taking incentives related to compensation in the form of executive stock options affect the decision to engage in merger and acquisition (M&A) activities with particular attention to same-industry versus cross-industry acquisitions. Risk taking incentives increase the propensity of M&As, especially for same-industry M&As. Furthermore, risk taking incentives increase the likelihood of cash payment for both same and cross-industry acquisitions. We do not find a significant direct stock price response difference between same-industry and cross-industry acquiring firms. The market responds favorably when risk taking incentives are higher for both same-industry acquisitions and cross-industry takeovers. We further find that the acquiring firm’s post-acquisition cash flow volatility is also positively related to risk taking incentives for both same- and cross-industry M&As.
DegreeMaster of Science (M.Sc.)
DepartmentEdwards School of Business
SupervisorYang, Fan; Wilson, Craig
CommitteeMaung, Min; Faleye, Olubunmi
Copyright DateJuly 2015
Mergers and acquisitions
Cash flow volatility