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A Unified Model of Corporate Acquisitions and Divestitures: An Incentive Perspective

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  • Choi, Yoon K
  • Merville, Larry J

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. Copyright 1998 by Kluwer Academic Publishers

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  • Choi, Yoon K & Merville, Larry J, 1998. "A Unified Model of Corporate Acquisitions and Divestitures: An Incentive Perspective," Review of Quantitative Finance and Accounting, Springer, vol. 10(2), pages 127-154, March.
    • Handle: RePEc:kap:rqfnac:v:10:y:1998:i:2:p:127-54
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    Cited by:

    1. Ma, Qing & Wang, Susheng, 2018. "Divestment options under tacit and incomplete information," Pacific-Basin Finance Journal, Elsevier, vol. 49(C), pages 15-29.
    2. Saeyoung Chang & Eric Mais & Michael Sullivan, 2013. "The effect of target managerial ownership on the choice of acquisition financing and CEO job retention," Review of Quantitative Finance and Accounting, Springer, vol. 40(3), pages 423-442, April.
    3. Erl, Ludwig & Kiesel, Florian & Koenigsmarck, Markus & Schiereck, Dirk, 2023. "Performance effects of sell-offs and the role of sell-off experience," The Quarterly Review of Economics and Finance, Elsevier, vol. 88(C), pages 244-257.

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