Do Firms with Specialized M&A Staff Make Better Acquisitions?

Sinan Gokkaya, Xi Liu and René M. Stulz

No 28778, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: G14 G24 G30 G34 (search for similar items in EconPapers)
Date: 2021-05
New Economics Papers: this item is included in nep-bec, nep-com, nep-cwa, nep-fmk and nep-ind
Note: CF
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Published as Sinan Gokkaya & Xi Liu & René M. Stulz, 2023. "Do firms with specialized M&A staff make better acquisitions?," Journal of Financial Economics, vol 147(1), pages 75-105.

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