Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/94044
Authors: 
Kräkel, Matthias
Müller, Daniel
Year of Publication: 
2013
Series/Report no.: 
SFB/TR 15 Discussion Paper 410
Abstract: 
We consider a two-stage principal-agent model with limited liability in which a CEO is employed as agent to gather information about suitable merger targets and to manage the merged corporation in case of an acquisition. Our results show that the CEO systematically recommends targets with low synergies'€”even when targets with high synergies are available'€”to obtain high-powered incentives and, hence, a high personal income at the merger-management stage. We derive conditions under which shareholders prefer a self-commitment policy or a rent-reduction policy to deter the CEO from opportunistic recommendations.
Subjects: 
acquisition
merger
moral hazard
JEL: 
D82
D86
G34
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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