Mergers, executive risk reduction, and stockholder wealth

Wilbur Lewellen, Claudio Loderer, Ahron Rosenfeld

Research output: Contribution to journalArticlepeer-review

28 Scopus citations


Among the possible consequences of agency problems between corporate owners and managers is a tendency by managers to make investment decisions for their firms that are deliberately aimed at reducing firm risk, as a means to control managers' personal wealth risk. The literature has suggested that such behavior may occur to the detriment of share-holder wealth, and that mergers may be a particular class of investment decisions for which the behavior would be observable. We test these hypotheses empirically, but find no evidence from our merger sample that risk reduction for the acquiring firm is the typical outcome nor that, when it occurs, it is differentially costly for shareholders.
Original languageEnglish
Pages (from-to)459-472
Number of pages14
JournalJournal of Financial and Quantitative Analysis
Issue number4
StatePublished - 1989

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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