RISK REDUCTION AS A MANAGERIAL MOTIVE FOR CONGLOMERATE MERGERS.

Yakov Amihud*, Baruch Lev

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

In this study, a ″managerial″ motive for conglomerate merger is advanced and tested. Specifically, managers, as opposed to investors, are hypothesized to engage in conglomerate mergers to decrease their largely undiversifiable ″employment risk″ (i. e. , risk of losing job, professional reputation, etc. ). Such risk-reduction activities are considered here as managerial perquisites in the context of the agency cost model. This hypothesis about conglomerate merger motivation is empirically examined in two different tests and found to be consistent with the data.

Original languageEnglish
Pages (from-to)605-617
Number of pages13
JournalBell Journal of Economics
Volume12
Issue number2
DOIs
StatePublished - 1981

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