Workshop Series: Eliezer Fich

24 August, 2011 - 10:30 to 12:00
Room 430 Joyce Ackroyd Building (37)

Abstract:
We develop two hypotheses to study merger bonuses provided to target CEOs during acquisitions: the self-serving-bargaining hypothesis and the low-synergy-target hypothesis. The first hypothesis argues that bonuses signal agency problems, with target CEOs sacrificing takeover premiums for personal gain. The alternative views bonuses as efficient CEO compensation when takeovers generate small gains. Consistent with both hypotheses, targets dispensing merger bonuses earn 3.6% lower premiums. However, acquisition announcement returns to acquirers when bonuses occur are indistinguishable from the returns to other bidders. Combined, these findings indicate that in deals where target CEOs get merger bonuses, bidders pay less to buy the target but they also get less in the form of low synergies.

Followed by lunch.

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Eliezer Fich, Associate Professor, Lebow College of Business, Drexel University, Philadelphia, US

Eliezer Fich is an Associate Professor of Finance and a Distinguished Research Fellow at the Drexel University LeBow College of Business. He obtained his Ph.D. from the NYU Stern School of Business, and his Masters and Undergraduate degrees from Columbia University. Professor Fich is involved in empirical research in corporate finance. He has published papers in prestigious academic journals such as the Journal of Finance, the Journal of Financial Economics and the Journal of Business. In addition, Professor Fich has being quoted in the business sections of The Wall Street Journal, The New York Times, and USA Today. Professor Fich has written business opinion briefs for CNBC.com.