A Thorough Examination of Agency Theory and Agency Costs in M&A
Downloads
M&A decisions are often aimed at strategic goals like economies of scale, market expansion, or diversifying operations. Yet, these objectives can be impeded by agency costs stemming from conflicts between shareholders and managers. Agency costs manifest in forms such as high executive pay, managerial turnover, and resource misallocation. Therefore, grasping and scrutinizing agency costs in M&A is crucial for mitigating adverse impacts on transaction success. This analysis intends to highlight various facets of agency costs in M&A, covering types, causes, and organizational mitigation strategies.
Ajay, S., Fuhrmann, J., & Kryut, B. (2019). Deal Logic Red Hat Inc. / IBM Corp. Retrieved from https://opus4.kobv.de/opus4-whu/frontdoor/index/index/docId/764
Alvarez, S., Zander, U., Barney, J. B., & Afuah, A. (2020). Developing a theory of the firm for the 21st century. Academy of Management Review, 45(4), 711-716. https://doi.org/10.5465/amr.2020.0372
Baker, R. M. (2019). The agency of the principal-agent relationship: An opportunity for HRD. Advances in Developing Human Resources, 21(3), 303-318. https://doi.org/10.1177/1523422319851274
Battisti, E., Christofi, M., Vrontis, D., & Nirino, N. (2021). Past, present, and future of mergers and acquisitions in the MENA region: A systematic review and integrative framework. International Studies of Management and Organization, 51(3), 276-296. https://doi.org/10.1080/00208825.2021.1959876
Baysinger, B. D., & Butler, H. N. (1985). Corporate governance and the board of directors: Performance effects of changes in board composition. Journal of Law, Economics, & Organization, 1(1), 101-124. https://doi.org/10.1093/oxfordjournals.jleo.a036883.
Bendickson, J., Muldoon, J., & Davis, P. E. (2016). Agency theory: The times, they are a-changin. Management Decision, 54(1), 174-193. https://doi.org/10.1108/MD-02-2015-0058
Bettignies, J. E., & Ross, T. W. (2013). Mergers, agency expenses, and social welfare. The Journal of Law, Economics, and Organization, 30(2), 401-436. https://doi.org/10.1093/jleo/ews047
Carlier, G. (2001). Broad existence outcome for the principal-agent dilemma with adverse selection. Journal of Mathematical Economics, 35(1), 129-150. https://doi.org/10.1016/S0304-4068(00)00057-4
Cakali, K. R. (2022, March 18). Agency conflict in corporate oversight: Worldcom case. Retrieved from https://dergipark.org.tr/en/pub/isletme/issue/65926/1018945
Cervellati, E. M. & Pavla, G. (2019). Mergers and purchases in the ICT market: The example of Microsoft and LinkedIn Corp. Retrieved from http://dspace.unive.it/handle/10579/14663
Das, S. (2019). Influence of merger on market rate and product quality: American and US Airways. Review of Industrial Organization, 55(3), 339-374. https://doi.org/10.1007/s11151-019-09717-2
Ekinci, B. (2017). Favoritism connection between principal and agent with agency expenses. Manas Journal of Social Studies, 6(2), 73-96. https://dergipark.org.tr/tr/pub/mjss/issue/40510/485577
El Diri, M. E., Lambrinoudakis, C., & Alhadab, M. (2020). Corporate governance and earnings management in concentrated markets. Journal of Business Research, 108, 291-306. https://doi.org/10.1016/j.jbusres.2019.11.013
Emmerich, A. O. (2020, March 1). The fresh dealmakers and dealbreakers: M&A activism. Retrieved from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3557520
Gompers, P. A. (2022). Prime investment, monitoring, and the staging of venture capital. In Routledge eBooks (pp. 285-313). https://doi.org/10.4324/9781315235110-17
Gökkaya, S., Liu, X., & Stulz, R. M. (2023). Do firms with specialized M&A staff conduct better acquisitions? Journal of Financial Economics, 147(1), 75-105. https://doi.org/10.1016/j.jfineco.2022.09.002
Hendrastuti, R., & Harahap, R. F. (2023). Agency theory: Examination of the theory and modern research. Jurnal Akuntansi Aktual, 10(1), 85-85. https://doi.org/10.17977/um004v10i12023p085
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305-360. Retrieved from https://www.sfu.ca/~wainwrig/Econ400/jensen-meckling.pdf
Junni, P., & Teerikangas, S. (2019). Mergers and Acquisitions Oxford Research Encyclopedia of Business and Management. https://doi.org/10.1093/acrefore/9780190224851.001.0001/acrefore-9780190224851-e-15
Kivistö, J., & Zalyevska, I. (2015). Agency theory as foundation for higher education administration. In J. Huisman et al. (Eds.), The Palgrave international handbook of higher education policy and administration (pp. 132-151). https://doi.org/10.1007/978-1-137-45617-5_8
Kline, W. A., & Brown, R. S. (2019). Merger and acquisition targets: The role of moral risk and acquiring firm manager compensation. Journal of Managerial Issues, 119-136. Retrieved from https://www.jstor.org/stable/45176611
Kumar, B. R. (2019a). Major acquisitions by Facebook. In Wealth creation in the world’s largest mergers and acquisitions. Management for Professionals. Springer, Cham, 321-327. https://doi.org/10.1007/978-3-030-02363-8_39
Kumar, B. R. (2019b). Actavis-Allergan merger deal. In Wealth creation in the world’s largest mergers and acquisitions. Management for Professionals. Springer, Cham, 183-189. https://doi.org/10.1007/978-3-030-02363-8_19
Lee, C., & Wingreen, S. C. (2010). Transferability of knowledge, skills, and abilities along IT career paths: An agency theory viewpoint. Journal of Organizational Computing and Electronic Commerce, 20(1), 23-44. https://doi.org/10.1080/10919390903482382
Lei, Q., Lin, B., & Wei, M. (2013). Types of agency expense, corporate governance and liquidity. Journal of Accounting and Public Policy, 32(3), 147-172. https://doi.org/10.1016/j.jaccpubpol.2013.02.008
Lund, D. S. (2019). Nonvoting shares and efficient corporate governance. Stanford Law Review, 71, 687-720. Retrieved from https://heinonline.org/hol-cgi-bin/get_pdf.cgi?handle=hein.journals/stflr71§ion=18
Maas, A., Heugens, P., & Reus, T. H. (2018). Viceroys or emperors? An institution-based insight on merger and acquisition frequency and shareholder benefit. Journal of Management Studies, 56(1), 234-269. https://doi.org/10.1111/joms.12335
Rashid, A. (2015). A reexamination of agency theory: Board independence and agency cost evidence from Bangladesh. Journal of Business Ethics, 130(1), 181-198. https://doi.org/10.1007/s10551-014-2211-y
Ross, S. A. (1979). Balance and the agency--impermissible agents in public agency issue. The American Economic Review, 69(2), 308-312. Retrieved from http://www.jstor.org/stable/1801664
Sarabia, M., Crecente, F., & Castaño, R. (2019). Why do sustainable mergers fail to manage entrepreneurship? Sustainability, 11(2), 525. https://doi.org/10.3390/su11020525
Schäuble, J. (2019). The impact of external and internal corporate governance mechanisms on agency costs. Corporate Governance, 19(1), 1-22. https://doi.org/10.1108/CG-02-2018-0053
Şişmanoğlu, E., Karayiğit, D. T., & Karabinar, S. (2020). The accounting and reporting of agency costs within agency theory framework. Journal of Accounting and Taxation Studies, 13(3), 975-987. https://doi.org/10.29067/muvu.655159
Song, H., Li, X., & Zhang, X. (2019). Research on the influence of diversification strategy model on enterprise value based on principal-agent theory. In 2019 3rd International Seminar on Education, Management and Social Sciences (ISEMSS 2019) (pp. 263-269). Retrieved from https://www.atlantis-press.com/proceedings/isemss-19/125918620
Tekin, H., & Polat, A. Y. (2020). A review of agency theory in financial context. Anemon Muş Alparslan University Journal of Social Sciences, 8(4), 1323-1329. https://doi.org/10.18506/anemon.712351
Wu, C.-W., & Reuer, J. J. (2021). Acquirers' perception of signals in M&A markets: Influence of acquirer experience on objective selection. Journal of Management Studies, 58(5), 1237-1266. https://doi.org/10.1111/joms.12637
Yen, T.-Y., & André, P. (2019). The market response to corporate social responsibility's effect on mergers and acquisitions in developing markets. The Quarterly Review of Economics and Finance, 71, 114-131. Retrieved from https://www.sciencedirect.com/science/article/pii/S1062976917303873
