Control Rights Allocation and Shareholder Wealth Effect in MA

摘要

In the comparatively stable context of day-to-day operation, based on the balanced allocation of control rights which realized in the long-term game, parties of the firm can anticipate their final gains in the incomplete contracts among them. M&A disturbs the existing control rights allocation, meanwhile the post-merger allocation is hard to predicted, so only with mortgaged physical assets, the shareholders can't support other stakeholders' confidence about contractual claims. This state may bring about the prevalence of managerial entrenchment and short-term opportunistic behavior, and lead to value destruction at last. With the analysis above, we conclude that, the key value creation factors in M&A are the good corporate government status and sufficiently unused managerial services of the acquiring firm, capital strength alone can't guarantee the acquiring firm's shareholders to gain from M&A.