Abstract

This thesis consists of three essays that examine the role of managerial traits (specifically managerial conservatism, interest alignment with shareholders and debtholders, beliefs about firm value and hubris) on their firms’ acquisition and CSR choices and their valuation effects. All the essays use hand-collected pension plan data.
The first essay finds support for a managerial conservatism explanation for acquirer acquisition choices and M&A price effects. More conservatively managed acquirers are more likely to use cash as the method of payment and to target less risky firms (e.g. being public or having lower leverage or managerial conservatism). We find that acquirers experience poorer price effects for stock versus cash payment even after controlling for the equity price effect and that these price effects monotonically deteriorate with increasing managerial conservatism, consistent with the agency problems associated with managerial conservatism. These results remain robust using propensity score matching, a four- or five-factor model, the BHAR methodology, top five executives instead of CEO when measuring managerial conservatism, and the inclusion of various controls (e.g., multiple or single acquirers, policy uncertainty, business cycle, managerial hubris, firm mispricing and Republican orientation).
The second essay finds that managerial interest alignment with shareholders (debtholders) of acquirers is positively related to the likelihood of using stock (cash) as the M&A payment method, positively (negatively) related with M&A acquirer equity price effects, and negatively (positively) related with M&A acquirer bond price effects. While managerial conservatism is positively related with an acquirer’s CSR ranking it is negatively related with an acquirer’s M&A price effects. Information about an acquirer’s misvaluation contained in pre-announcement short selling by investors and the abnormal trading of its executives also affects the acquirer’s choice of payment method and M&A price effects.