Findings from several studies
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Findings from several studies
Thu Aug 18, 2011 5:17 am
Thu Aug 18, 2011 5:17 am
QuoteSource: The OG Verbal Review 2nd Ed
Findings from several studies on corporate mergers and acquisitions during the 1970’s and 1980’s raise questions about why firms initiate and consummate such transactions. One study showed, for example, that acquiring firms were on average unable to maintain acquired firms’ pre-merger
levels of profitability. A second study concluded that post-acquisition gains to most acquiring firms were not adequate to cover the premiums paid to obtain acquired firms. A third demonstrated that, following the announcement of a prospective merger, the stock of the prospective acquiring firm tends to increase in value much less than does that of the firm for which it bids. Yet mergers and acquisitions remain common, and bidders continue to assert that their objectives are economic ones.
Acquisitions may well have the desirable effect of channeling a nation’s resources efficiently from less to more efficient sectors of its economy, but the individual acquisitions executives arranging these deals must see them as advancing either their own or their companies’ private economic interests. It seems that factors having little to do with corporate economic interests explain acquisitions. These factors may include the incentive compensation of executives, lack of monitoring by boards of directors, and managerial error in estimating the value of firms targeted for acquisition. Alternatively, the acquisition acts of bidders may derive from modeling: a manager does what other managers do.
Q is in image
OA: D
Findings from several studies on corporate mergers and acquisitions during the 1970’s and 1980’s raise questions about why firms initiate and consummate such transactions. One study showed, for example, that acquiring firms were on average unable to maintain acquired firms’ pre-merger
levels of profitability. A second study concluded that post-acquisition gains to most acquiring firms were not adequate to cover the premiums paid to obtain acquired firms. A third demonstrated that, following the announcement of a prospective merger, the stock of the prospective acquiring firm tends to increase in value much less than does that of the firm for which it bids. Yet mergers and acquisitions remain common, and bidders continue to assert that their objectives are economic ones.
Acquisitions may well have the desirable effect of channeling a nation’s resources efficiently from less to more efficient sectors of its economy, but the individual acquisitions executives arranging these deals must see them as advancing either their own or their companies’ private economic interests. It seems that factors having little to do with corporate economic interests explain acquisitions. These factors may include the incentive compensation of executives, lack of monitoring by boards of directors, and managerial error in estimating the value of firms targeted for acquisition. Alternatively, the acquisition acts of bidders may derive from modeling: a manager does what other managers do.
Q is in image
OA: D
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Tue Aug 23, 2011 3:45 am
vikram4689
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Wed Apr 04, 2012 1:14 am
QUESTION
It can inferred from the passage that the author would be most likely to agree with which
of the following statements about corporate acquisitions?
A. Their known benefits to national economies explain their appeal to individual
firms during the 1970’s and 1980’s.
B. Despite their adverse impact on some firms, they are the best way to channel
resources from less to more productive sectors of a nation’s economy.
C. They are as likely to occur because of poor monitoring by boards of directors as
to be caused by incentive compensation for managers.
D. They will be less prevalent in the future, since their actual effects will gain wider
recognition.
E. Factors other than economic benefit to the acquiring firm help to explain the
frequency with which they occur
Following line states that deals may be happening because of personal interest of managers or their firm's economic interest then how come factors other than economic benefit to the acquiring firm will explain the reason for deals
individual acquisitions executives arranging these deals must see them as advancing either their own or their companies’ private economic interests
It can inferred from the passage that the author would be most likely to agree with which
of the following statements about corporate acquisitions?
A. Their known benefits to national economies explain their appeal to individual
firms during the 1970’s and 1980’s.
B. Despite their adverse impact on some firms, they are the best way to channel
resources from less to more productive sectors of a nation’s economy.
C. They are as likely to occur because of poor monitoring by boards of directors as
to be caused by incentive compensation for managers.
D. They will be less prevalent in the future, since their actual effects will gain wider
recognition.
E. Factors other than economic benefit to the acquiring firm help to explain the
frequency with which they occur
Following line states that deals may be happening because of personal interest of managers or their firm's economic interest then how come factors other than economic benefit to the acquiring firm will explain the reason for deals
individual acquisitions executives arranging these deals must see them as advancing either their own or their companies’ private economic interests
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Tue Apr 10, 2012 4:26 am
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