Do firms with specialized M&A staff make better acquisitions?

Do firms with specialized M&A staff make better acquisitions?

Sinan Gokkaya, Xi Liu, René Stulz

Series number :

Serial Number: 
778/2021

Date posted :

August 11 2021

Last revised :

August 11 2021
SSRN Share

Keywords

  • mergers and acquisitions • 
  • acquisitions • 
  • corporate takeover market • 
  • corporate development • 
  • M&A staff

We open the black box of the M&A decision process by constructing a comprehensive sample of US firms with specialized M&A staff. We investigate whether specialized M&A staff improves acquisition performance or facilitates managerial empire building instead.

We find that firms with specialized M&A staff make better acquisitions when acquisition performance is measured by stock price reactions to announcements, long-run stock returns, operating performance, divestitures, and analyst earnings forecasts.This effect does not hold when the CEO is powerful, overconfident, or entrenched. Acquisitions by firms without specialized staff do not create value, on average. We provide evidence on mechanisms through which specialized M&A staff improves acquisition performance. For identification, we use the staggered recognition of inevitable disclosure doctrine as a source of exogenous variation in the employment of specialized M&A staff.

Authors

Real name:
Sinan Gokkaya
Real name:
Xi Liu