Proximity with affinity: How M&A top executives could exacerbate agency conflicts?

Jean-Gabriel Cousin, Marion Dupire and Jean-Yves Filbien

Finance, 2023, vol. 44, issue 3, 109-153

Abstract: In this paper, we investigate the value creation for bidders of having a top executive dedicated to external growth. Using a sample of 10,777 US deals between 1993 and 2021, our results show that the presence of an M&A top executive is negatively associated with bidder gains. We explore the underlying mechanisms for this result and find evidence of agency effects: the negative effect of M&A top executives is more pronounced for mega deals and firms where the CEO is also chairman of the board. This result supports the idea that when the M&A team is headed by a top executive, his interests are more aligned with the CEO, which can amplify the agency problems associated with weak internal governance. We also explore other drivers such as overconfidence or mispricing but find no evidence of any behavioral mechanism underlying our results. JEL codes: G14, G34.

Keywords: Mergers and acquisitions; Acquirer performance; Top executive (search for similar items in EconPapers)
JEL-codes: G14 G34 (search for similar items in EconPapers)
Date: 2023
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