סמינר במימון חשבונאות
What Drives Acquisition Premiums and Why do Targets Reject Offers? – Evidence from Failed Acquisition Offers
Omri Even Tov , University of California, Berkeley
Using a unique hand-collected sample of 1,195 failed acquisition offers from 1979 to 2012, we investigate two research questions. The first focuses on whether it is the synergy hypothesis or
the information hypothesis that drives acquisition premiums, while the second focuses on whether a target’s rejection of an acquisition offer is consistent with rent extraction or incentive alignment
between management and shareholders. A key factor in addressing these two questions is to partition the sample into acquisition offers that fail due to the target’s rejection (rejection group) and those
that fail due to other reasons (other-reasons group). With respect to our first question, we find that the information hypothesis dominates in the rejection group, while the synergy hypothesis dominates
in the other-reasons group. With respect to our second question, our analyses focus on only the rejection group because unlike the other-reasons group, in the rejection group the CEO likely plays a key
role in the rejection decision. Therefore, this setting potentially has the largest conflict of interest between managers and shareholders. Using the rejection group, we test for the efficacy of different
corporate governance measures in facilitating managerial rent extraction or incentive alignment. We find that the existence of a poison pill provision and, to a lesser extent, CEO share ownership, exacerbate
managerial rent extraction. In contrast, we find that the existence of a staggered board and higher levels of CEO option ownership enhance incentive alignment.