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Cover of: Mergers and CEO Power
Felipe Balmaceda

Mergers and CEO Power

Section: Article
Volume 165 (2009) / Issue 3, pp. 454-486 (33)
Published 09.07.2018
DOI 10.1628/093245609789471943
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  • 10.1628/093245609789471943
Summary
I propose a model of mergers in which synergies and CEO power play a crucial role. A merger is modeled as a bargaining game between the acquiring and the target board of directors, with the gains from a merger divided according to the generalized Nash bargaining solution. The model's implications are consistent with the available empirical evidence on stock returns, and yield some new untested implications that are mainly related to the relationship between CEO power, corporate governance, and mergers. Finally, the model sheds light on the relationship between aggregate merger activity, synergies, and CEO power.