Corporate governance and merger activity in the U.S. : making sense of the 1980s and 1990s PDF
Preview Corporate governance and merger activity in the U.S. : making sense of the 1980s and 1990s
IPiiP MITLIBRARIES 3 9080 02246 2235 I; 111 iii mm Digitized by the Internet Archive in 2011 with funding from Boston Library Consortium IVIember Libraries http://www.archive.org/details/corporategovernaOOholm 1 HB31 OEWEy .M415 Massachusetts Institute of Technology Department of Economics Working Paper Series CORPORATE GOVERNANCE AND MERGER ACTIVITY IN THE U.S.: MAKING SENSE OF THE 1980s AND 1990s Bengt Holmstrom Steven N. Kaplan Working Paper 01-1 February 2001 Room E52-251 50 Memorial Drive MA Cambridge, 02142 This paper can be downloaded without charge from the Social Science Research Network Paper Collection at http://papers.ssrn.com/paper.taf7abstract id=261112 Massachusetts Institute ot Technology Departnnent ot Econonnics Working Paper Series CORPORATE GOVERNANCE AND MERGER ACTIVITY IN THE U.S.: MAKING SENSE OF THE 1980s AND 1990s Bengt Holmstrom Steven N. Kaplan Working Paper 01-1 February 2001 RoomE52-251 50 Memorial Drive MA Cambridge, 02142 This paper can be downloaded without charge from the Social Science Research Network Paper Collection at http://papers.ssrn.com/paper.taf7abstract id=261112 i^ASSACHUSlTITnSSTITDTr _OFTKHTOLOGY AUG 2 2 2001 LIBRARIES Corporate Governance and Merger Activity in the U.S.: Making sense ofthe 1980s and 1990s by Bengt Holmstrom and Steven N. Kaplan First draft: September 2000 This draft: Februar>' 19, 2001 Abstract This paperdescribes and considers explanations forchanges in corporate governance and merger activity in the United States since 1980. Corporate governance in the 1980s was dominated by intense merger activity distinguished by the prevalence ofleveraged buyouts (LBOs) and hostility. After a briefdecline in the early 1990s, substantial merger activity resumed in the second halfofthe decade, while LBOs and hostility did not. Instead, internal corporate governance mechanisms appear to have played a larger role in the 1990s. We conclude by considering whether these changes and the movement toward shareholder value are likely to be permanent. Bengt Holmstrom is the Paul A. Samuelson Professor ofEconomics, Massachusetts Institute ofTechnology, Cambridge, Massachusetts. Steven N. Kaplan is NeubauerFamily ProfessorofEntrepreneurship and Finance, Graduate School ofBusiness, University ofChicago,Chicago, Illinois. Both authorsarealsoResearch Associates. National Bureau ofEconomic Research, Cambridge, Massachusetts.
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