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Do managerial incentives prevent value-destroying acquisitions?

Hoff, Christoffer; Nordli, Andreas
Master thesis
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URI
http://hdl.handle.net/11250/2621222
Date
2019
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  • Master of Science [1117]
Abstract
This paper examines how managerial incentives affect certain deal characteristics in

acquisitions and how these characteristics are related to announcement returns and shareholder

wealth. Based on our own results and extensive research, we identify large and diversifying

acquisitions to be value-destroying. Our findings suggest that performance-based

compensation, e.g. bonus and stock options, incentivizes the manager to acquire firms that

maximize shareholder wealth. Furthermore, we present empirical evidence that CEO duality

reduce the probability of engaging in diversifying, value-destroying acquisitions. These

findings suggest that managerial incentives significantly affect shareholder wealth in context

of acquisitions, where performance-based compensation and CEO duality prevent valuedestroying

acquisitions to some extent.
Description
Masteroppgave(MSc) in Master of Science in Business, Finance - Handelshøyskolen BI, 2019
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Handelshøyskolen BI

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