The Journal of Finance

Executive Careers and Compensation Surrounding Takeover Bids

Published: 07/01/1994   |   DOI: 10.1111/j.1540-6261.1994.tb00085.x

ANUP AGRAWAL, RALPH A. WALKLING

This article examines the impact of a takeover bid on the careers and compensation of chief executives of target firms. We find that acquisition attempts occur more frequently in industries where chief executive officers (CEO) have positive abnormal compensation. Target CEOs are more likely to be replaced when a bid succeeds, than when it fails. CEOs of target firms who lose their jobs generally fail to find another senior executive position in any public corporation within three years after the bid. Consistent with Fama's (1980) notion of “ex post settling up”, postbid compensation changes of managers retained after an acquisition attempt are negatively related to several measures of their prebid abnormal compensation. This result is robust to a variety of specifications and does not seem to be caused by mean reversion or selection bias. These findings are consistent with the hypothesis that a takeover bid generates additional information that is used by labor markets to discipline managers.

Managerial Incentives and Corporate Investment and Financing Decisions

Published: 09/01/1987   |   DOI: 10.1111/j.1540-6261.1987.tb03914.x

ANUP AGRAWAL, GERSHON N. MANDELKER

This paper examines the relationship between common stock and option holdings of managers and the choice of investment and financing decisions by firms. The authors find support for the hypothesis of a positive relationship between the security holdings of managers and the changes in firm variance and in financial leverage. This conclusion is based on samples of acquiring and divesting firms. The findings are consistent with the hypothesis that executive security holdings have a role in reducing agency problems.

Corporate Capital Structure, Agency Costs, and Ownership Control: The Case of All‐Equity Firms

Published: 09/01/1990   |   DOI: 10.1111/j.1540-6261.1990.tb02441.x

ANUP AGRAWAL, NANDU J. NAGARAJAN

This paper provides evidence that all‐equity firms exhibit greater levels of managerial stockholdings, more extensive family relationships among top management, and higher liquidity positions than a matched sample of levered firms. Further, top managers of all‐equity firms with family involvement in corporate operations have greater control of corporate voting rights than managers of all‐equity firms without family involvement. These findings are consistent with the interpretation that managerial control of voting rights and family relationships among senior managers are important factors in the decision to eliminate leverage.

The Post‐Merger Performance of Acquiring Firms: A Re‐examination of an Anomaly

Published: 09/01/1992   |   DOI: 10.1111/j.1540-6261.1992.tb04674.x

ANUP AGRAWAL, JEFFREY F. JAFFE, GERSHON N. MANDELKER

The existing literature on the post‐merger performance of acquiring firms is divided. We re‐examine this issue, using a nearly exhaustive sample of mergers between NYSE acquirers and NYSE/AMEX targets. We find that stockholders of acquiring firms suffer a statistically significant loss of about 10% over the five‐year post‐merger period, a result robust to various specifications. Our evidence suggests that neither the firm size effect nor beta estimation problems are the cause of the negative post‐merger returns. We examine whether this result is caused by a slow adjustment of the market to the merger event. Our results do not seem consistent with this hypothesis.