Managerial Incentives to Diversify and Shareholder Monitoring: Evidence from International Acquisitions

The authors examine how a firm's risk change around an international acquisition is related to the managerial equity interest in the firm. Focusing on the international acquisitions made by bidding fi rms that have weak monitoring from outside shareholders, those that make an acquisition in an...

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Bibliographic Details
Published in:Multinational business review 2005-11, Vol.13 (3), p.87-105
Main Authors: Kim, Dong-Kyoon, Kwok, Chuck C. Y, Young Baek, H
Format: Article
Language:English
Subjects:
Acquisition
Acquisitions & mergers
Cash flow
Compensation
Diversification
Equity
Equity stake
Expected values
Hypotheses
Incentives
International
Investments
Investors
Managerial incentives
Multinational corporations
Rates of return
Risk
Securities markets
Shareholder monitoring
Stock exchanges
Stock options
Stock return
Stockholders
Studies
Citations: Items that this one cites
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Summary:The authors examine how a firm's risk change around an international acquisition is related to the managerial equity interest in the firm. Focusing on the international acquisitions made by bidding fi rms that have weak monitoring from outside shareholders, those that make an acquisition in an unrelated industry, and those that experience negative stock returns around announcements, the authors find that managers of these firms tend to undertake risk-decreasing international acquisitions with the increase of managerial equity ownership and previously granted stock options. The evidence suggests that managerial incentives to use foreign acquisitions to reduce the risk of their personal wealth are more often utilized in the absence of shareholder monitoring.
ISSN:1525-383X
2054-1686
DOI:10.1108/1525383X200500016