A Clinical Exploration of Value Creation and Destruction in Acquisitions: Organizational Design, Incentives, and Internal Capital Markets

This paper presents clinically-based studies of two acquisitions that received very different stock market reactions at announcement one positive and one negative. Despite the differing market reactions, we find that ultimately neither acquisition created value overall. In exploring the reasons for the acquisition outcomes, we rely primarily on interviews with managers and on internally generated performance data. We compare the results of these analyses to those from analyses of post-acquisition operating and stock price performance traditionally applied to large samples. We draw two primary conclusions. (1) Our findings highlight the difficulty of implementing a successful acquisition strategy and of running an effective internal capital market. Post-acquisition difficulties resulted because: (a) managers of the" acquiring company did not deeply understand the target company at the time of the acquisition; (b) the acquirer imposed an inappropriate organizational design on the target as part of the post-acquisition integration process; and (c) inappropriate management incentives existed at both the top management and division levels. (2) Measures of operating performance used in large sample studies are weakly correlated with actual post-acquisition operating performance."

Application of Latent Variable Methods to the Study of Cognitive Decline When Tests Change over Time

The way a construct is measured can differ across cohort study visits, complicating longitudinal comparisons. We demonstrated the use of factor analysis to link differing cognitive test batteries over visits to common metrics representing general cognitive performance, memory, executive functioning, and language

Midlife Hypertension and 20-Year Cognitive Change: The Atherosclerosis Risk in Communities Neurocognitive Study

Hypertension is a treatable potential cause of cognitive decline and dementia, but its greatest influence on cognition may occur in middle age

Impact of Differential Attrition on the Association of Education With Cognitive Change Over 20 Years of Follow-up: The ARIC Neurocognitive Study

Studies of long-term cognitive change should account for the potential effects of education on the outcome, since some studies have demonstrated an association of education with dementia risk. Evaluating cognitive change is more ideal than evaluating cognitive performance at a single time point, because it should be less susceptible to confounding. In this analysis of 14,020 persons from a US cohort study, the Atherosclerosis Risk in Communities (ARIC) Study, we measured change in performance on 3 cognitive tests over a 20-year period, from ages 48–67 years (1990–1992) through ages 70–89 years (2011–2013). Generalized estimating equations were used to evaluate the association between education and cognitive change in unweighted adjusted models, in models incorporating inverse probability of attrition weighting, and in models using cognitive scores imputed from the Telephone Interview for Cognitive Status for participants not examined in person. Education did not have a strong relationship with change in cognitive test performance, although the rate of decline was somewhat slower among persons with lower levels of education. Methods used to account for selective dropout only marginally changed these observed associations. Future studies of risk factors for cognitive impairment should focus on cognitive change, when possible, to allow for reduction of confounding by social or cultural factors

Restructuring Top Management: Evidence from Corporate Spinoffs

There has been substantial research on both asset restructuring and top management changes. The connection between the two, however, has received little attention. Here, we examine spinoffs as events through which top management is restructured. Our main findings are: 1) both firm-specific human capital and more general human capital, such as governance expertise and top management experience, affect the composition of spinoff firms' top management, 2) the structure of spinoff top management is related to the value created by a spinoff, and 3) for a subsample of firms, spinoffs serve as a form of management dismissal, with the opportunity to manage a smaller, weaker spinoff firm serving as a "consolation prize.&quot

Relationships, corporate governance, and performance: Evidence from private placements of common stock

Using data from private placement contracts, we analyze relationships between investors and issuers, and their impact on corporate governance and performance. Most investors have a relationship with the issuer pre-placement and many new relationships are formed through the placement agreement. New relationships are largely governance-related (board seats and/or 5% or greater blocks), but also include key business partnerships and/or employment arrangements. We have three main findings. First, new relationships drive the positive stock price response at announcement; placements lacking new relationships are non-events. Second, investors with relationship ties to the issuer are more likely to gain directorships as part of the placement. Third, new relationships are associated with stronger post-placement profitability and stock price performance. Overall, our findings are consistent with private placements creating value when they are associated with increased monitoring and strong governance.Private placement Private equity Equity issuance Relationship investing Relationship investor Agency theory Asymmetric information Entrenchment Specific investment Relationship-specific investment, governance, blockholders Ownership concentration