Value-based Management and Merger & Acquisition Returns: A Multi-level Contingency Model

Sebastian Firk, Franz Maybuechen*, Jana Oehmichen, Michael Wolff

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

4 Citations (Scopus)
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Abstract

Whereas the performance effects of value-based management (VBM) have been intensively addressed in previous research, little is known regarding whether-and which-specific managerial decisions are improved by VBM. In this study, we take advantage of merger and acquisition (M&A) decisions that allow us to analyze a specific managerial decision with a direct assessment by the capital market. Moreover, to better grasp the underlying mechanisms of VBM, we consider potential contingency factors that may affect the relationship between VBM and M&As. Specifically, we examine the risk of managerial self-interest in M&A decisions that may be influenced by a firm's internal, industry- and country-specific contexts. We gather VBM data of firms from the Standard & Poor's 500 Index and the MSCI Europe Index between 2005 and 2011, and combine the data with deal data resulting in a sample of 2787 deals. Our empirical results do not indicate a positive direct effect from VBM on M&A returns. However, we find that VBM leads to superior M&A returns in the presence of contingency factors that increase the risk for self-interested managerial decisions.

Original languageEnglish
Pages (from-to)451-482
Number of pages32
JournalEuropean Accounting Review
Volume28
Issue number3
DOIs
Publication statusPublished - 27-May-2019

Keywords

  • Value-based management
  • Mergers & acquisitions
  • Event study
  • Managerial self-interest
  • PRODUCT MARKET COMPETITION
  • FREE CASH FLOW
  • CORPORATE GOVERNANCE
  • AGENCY COSTS
  • FIRM PERFORMANCE
  • VALUE CREATION
  • CROSS-BORDER
  • COMPENSATION PLANS
  • RISK-TAKING
  • OWNERSHIP

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