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We examine the
relationships between the wealth changes associated with a takeover
announcement to distinguish between three major competing
motives—synergy, hubris, and agency. Empirical tests indicate that
the synergy motive is the predominant explanation for the majority
of takeovers in Australia; however, the evidence is consistent with
the simultaneous presence of hubris in value-creating takeovers. The
evidence also suggests agency, not hubris, is the primary motivation
for the takeovers which result in value destruction. |