Findings from several studies on
corporate mergers and acquisitions
during the 1970's and 1980's raise
Line questions about why firms initiate and
(5) consummate such transactions. One
study showed, for example, that acquir-
ing firms were on average unable to
maintain acquired firms' pre-merger
levels of profitability. A second study
(10) concluded that post-acquisition gains
to most acquiring firms were not ade-
quate to cover the premiums paid
to obtain acquired firms. A third
demonstrated that, following the
(15) 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 merg-
(20) ers and acquisitions remain common,
and bidders continue to assert that
their objectives are economic ones.
Acquisitions may well have the desir-
able effect of channeling a nation's
(25) resources efficiently from less to
more efficient sectors of its economy,
but the individual acquisitions execu-
tives arranging these deals must see
them as advancing either their own or
(30) their companies' private economic
interests. It seems that factors hav-
ing little to do with corporate economic
interests explain acquisitions. These
factors may include the incentive
(35) 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
(40) bidders may derive from modeling:
a manager does what other man-
agers do.
--------------------------------------------------------------------------------
Q11:
According to the passage, during the 1970's and 1980's bidding firms differed from the firms for which they bid in that bidding firms
A. tended to be more profitable before a merger than after a merger
B. were more often concerned about the impact of acquisitions on national economies
C. were run by managers whose actions were modeled on those of other managers
D. anticipated greater economic advantages from prospective mergers
E. experienced less of an increase in stock value when a prospective merger was announced
--------------------------------------------------------------------------------
Q12:
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.
OA：AE
Q11：IMO E is the answer. Becuse line14-19 "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. "
so why my answer is wrong?
Q12: where can I find the answer? why?
corporate mergers and acquisitions
during the 1970's and 1980's raise
Line questions about why firms initiate and
(5) consummate such transactions. One
study showed, for example, that acquir-
ing firms were on average unable to
maintain acquired firms' pre-merger
levels of profitability. A second study
(10) concluded that post-acquisition gains
to most acquiring firms were not ade-
quate to cover the premiums paid
to obtain acquired firms. A third
demonstrated that, following the
(15) 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 merg-
(20) ers and acquisitions remain common,
and bidders continue to assert that
their objectives are economic ones.
Acquisitions may well have the desir-
able effect of channeling a nation's
(25) resources efficiently from less to
more efficient sectors of its economy,
but the individual acquisitions execu-
tives arranging these deals must see
them as advancing either their own or
(30) their companies' private economic
interests. It seems that factors hav-
ing little to do with corporate economic
interests explain acquisitions. These
factors may include the incentive
(35) 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
(40) bidders may derive from modeling:
a manager does what other man-
agers do.
--------------------------------------------------------------------------------
Q11:
According to the passage, during the 1970's and 1980's bidding firms differed from the firms for which they bid in that bidding firms
A. tended to be more profitable before a merger than after a merger
B. were more often concerned about the impact of acquisitions on national economies
C. were run by managers whose actions were modeled on those of other managers
D. anticipated greater economic advantages from prospective mergers
E. experienced less of an increase in stock value when a prospective merger was announced
--------------------------------------------------------------------------------
Q12:
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.
OA：AE
Q11：IMO E is the answer. Becuse line14-19 "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. "
so why my answer is wrong?
Q12: where can I find the answer? why?
