We thank Robert Hendershott, Mike Sullivan, two anonymous referees, and seminar participants at University of Nevada, Las Vegas and the 1997 Financial Management Association meetings for helpful comments. We also thank Beth Baugh for editorial assistance.
Managerial Motives and Merger Financing
Version of Record online: 9 MAR 2005
Volume 35, Issue 4, pages 139–152, November 2000
How to Cite
Chang, S. and Mais, E. (2000), Managerial Motives and Merger Financing. Financial Review, 35: 139–152. doi: 10.1111/j.1540-6288.2000.tb01434.x
- Issue online: 9 MAR 2005
- Version of Record online: 9 MAR 2005
- method of payment;
- ownership structure
We examine how managerial motives influence the choice of financing for a sample of 209 completed mergers from 1981–1988. Our evidence indicates that bidding firm management is more likely to finance mergers with cash when target firm ownership concentration is high, preventing the creation of an outside blockholder. This suggests bidding firm managers prefer to keep ownership structure widely diffused to reduce external monitoring. We also find that bidding firm management is more likely to finance mergers with stock when the variance of bidding firm's stock return is high. This suggests managers of risky firms prefer leverage-reducing transactions to reduce their personal risk.