Do Envious CEOs Cause Merger Waves?

Anand Goel () and Anjan Thakor ()

The Review of Financial Studies, 2010, vol. 23, issue 2, 487-517

Abstract: We develop a theory which shows that merger waves can arise even when the shocks that precipitated the initial mergers in the wave are idiosyncratic. The analysis predicts that the earlier acquisitions produce higher bidder returns, involve smaller targets, and result in higher compensation gains for the acquirer's top management team than the later acquisitions in the wave. We find strong empirical support for these predictions. The model also generates additional predictions, some of which remain to be tested. The Author 2009. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oxfordjournals.org., Oxford University Press.

Date: 2010
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