Date of Award

Spring 2009

Document Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Program/Concentration

Business Administration-Finance

Committee Director

Kenneth Yung

Committee Member

Mohammad Najand

Committee Member

David Selover

Abstract

Conventional models assume competition improves corporate efficiency as firms strive to outperform competitors. In the context of agency models, the link between competition and managerial behavior becomes fuzzy. Hart (1983) and Schmidt (1997) posit that competition reduces managerial slack. Scharfstein (1988) argues that competition might increase managerial shirking. Recent studies on the relation between managerial compensation and competition further document conflicting evidence. In this study, I examine the effect of product market competition on corporate mergers and acquisitions. My initial results suggest that the definition of competition is critical in evaluating corporate mergers and acquisitions. Using three new dimensions (product substitutability, market density, and entry cost) to measure competition, I find the manager's M&A decisions could have different implications across the three dimensions. Regarding acquisition premium, my results consistently show a negative relation between competition and the size of the premium.

DOI

10.25777/8am1-dm61

ISBN

9781109142891

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