Managerial Incentives to Diversify and Shareholder Monitoring: Evidence from International Acquisitions

Dong Kyoon Kim, Chuck C.Y. Kwok, H. Young Baek

Research output: Contribution to journalReview article

Abstract

The authors examine how a firm’s risk change around an international acquisition is related to the managerial equity interest in the firm. Focusing on the international acquisitions made by bidding fi rms that have weak monitoring from outside shareholders, those that make an acquisition in an unrelated industry, and those that experience negative stock returns around announcements, the authors find that managers of these firms tend to undertake risk-decreasing international acquisitions with the increase of managerial equity ownership and previously granted stock options. The evidence suggests that managerial incentives to use foreign acquisitions to reduce the risk of their personal wealth are more often utilized in the absence of shareholder monitoring.

Original languageEnglish
Pages (from-to)87-105
Number of pages19
JournalMultinational Business Review
Volume13
Issue number3
DOIs
StatePublished - 19 Nov 2005

Keywords

  • Acquisition, Stock return
  • Managerial incentives
  • Risk
  • Shareholder monitoring

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