A Unified Model of Corporate Acquisitions and Divestitures: An Incentive Perspective |
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Authors: | Choi Yoon K Merville Larry J |
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Institution: | (1) Department of Finance, University of Central Florida, Orlando, FL, 32816;(2) School of Management, The University of Texas at Dallas, Richardson, TX, 75083 |
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Abstract: | The purpose of this paper is to unify corporate acquisitions and divestitures (e.g., spin-offs, equity carve-outs and sell-offs) into a simple but comprehensive agency model where risk and managerial incentives interact to determine an optimal corporate governance and an incentive compensation scheme. Emphasizing human and nonhuman aspect of corporate assets, the model not only explains existing empirical evidence regarding contractual and organizational changes, but also suggests new perspective regarding firms' behavior around corporate acquisitions and divestitures. Thus, it attempts to reconcile between synergistic and agency viewpoints in the takeover literature and provides determining factors in choosing between spinoffs and equity carve-outs. |
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Keywords: | acquisitions divestitures agency unified model |
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