Benefits of control, managerial ownership, and the stock returns of acquiring firms
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Benefits of control, managerial ownership, and the stock returns of acquiring firms by R. Glenn Hubbard

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Published by National Bureau of Economic Research in Cambridge, MA .
Written in English


  • Consolidation and merger of corporations.,
  • Stock ownership.,
  • Corporate governance.,
  • Corporations -- Investor relations.

Book details:

Edition Notes

StatementR. Glenn Hubbard, Darius Palia.
SeriesNBER working paper series -- no. 5079, Working paper series (National Bureau of Economic Research) -- working paper no. 5079.
ContributionsPalia, Darius., National Bureau of Economic Research.
The Physical Object
Pagination24 p. ;
Number of Pages24
ID Numbers
Open LibraryOL22419751M

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This paper examines the effect of the benefits of corporate control to managers on the relationship between managerial ownership and the stock returns of acquiring firms in corporate control transactions. At low levels of managerial ownership, agency costs of equity (such as perquisite consumption) reduce the returns earned by acquirers. At high levels of managerial ownership, managers enjoy nonassignable private benefits of control that they would lose if they sold their ownership stake. These benefits of control are increasing in the managerial ownership of a nonmonotonic relationship between the returns earned by acquirers and their managerial ownership level. Get this from a library! Benefits of control, managerial ownership, and the stock returns of acquiring firms. [R Glenn Hubbard; Darius Palia; National Bureau of Economic Research.]. This article examines how the benefits to managers of corporate control affect the relationship between the ownership and the stock returns of acquiring firms. At low levels of managerial.

a. immediately after the announcement of a planned acquisition, the stock price of the majority of acquiring firms declines. b. shareholders of acquired firms often earn above-average returns from an acquisition. c. the majority of acquisitions increase long-term value for the acquiring firm. In a large number of family owned firms, ownership and managerial control are not separated. True Amelia Smith is the sole owner of the successful restaurant chain, Amelia's Café. Ms. Smith has taken a no- interest loan from the company in order to build a luxurious seaside house for herself in .   Lewellen et al., Mergers and stock ownership of the estimated regressions, however, explain more than percent of the variation in the abnormal share price performance of the acquiring firms Portfolio returns As a final perspective on the data, the analytical approach which produced the results summarized in tables 5 through 7 is.   The acquiring firms experienced improvement in return on equity funds post-mergers and acquisition. The relevant data in Table 8 shows that shareholders of acquiring firms earn per cent significantly (p=0 returns 5 years post-M&A.

  Based on M&A data for U.S. firms from to , we find that acquiring firms with higher managerial ability achieve better long-term operating performance and stock returns. We also find that the positive effect of managerial ability on long-term performance is more pronounced when acquirers and target firms belong to the same industry.   Intercorporate investments are typically categorized depending on the percentage of ownership or voting control that the investing firm (investor) undertakes in the target firm (investee).   A controlling interest is when a shareholder holds a majority of a company's voting stock. A shareholder does not have to have majority ownership in a . involving mergers and acquisitions, showing the shareholder returns of target firms on their own, the returns to acquiring firms' shareholders, and the returns of both firms combined.1 In his survey, Bruner shows that 21 studies report positive and significant returns to .