TY - JOUR
T1 - Fortune Favors the Bold
AU - Meneghetti, Costanza
AU - Williams, Ryan
N1 - Publisher Copyright:
© 2017 Michael G. Foster School of Business, University of Washington.
PY - 2017/6/1
Y1 - 2017/6/1
N2 - We investigate whether incentives to join the Fortune 500 affect corporate decisions. Firms closer to the cutoff appear to take actions to join the list by engaging in more mergers and acquisitions activity, bidding for larger targets, and paying higher takeover premia. Further, the relation is stronger for firms with more-entrenched chief executive officers, and the stock market reaction to bids is worse when bidders are close to the Fortune 500's cutoff. A 1994 methodological change by Fortune acts as an exogenous shock for identification. Our results suggest that firms try to increase revenues to join the Fortune 500 but that such actions adversely affect shareholders.
AB - We investigate whether incentives to join the Fortune 500 affect corporate decisions. Firms closer to the cutoff appear to take actions to join the list by engaging in more mergers and acquisitions activity, bidding for larger targets, and paying higher takeover premia. Further, the relation is stronger for firms with more-entrenched chief executive officers, and the stock market reaction to bids is worse when bidders are close to the Fortune 500's cutoff. A 1994 methodological change by Fortune acts as an exogenous shock for identification. Our results suggest that firms try to increase revenues to join the Fortune 500 but that such actions adversely affect shareholders.
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U2 - 10.1017/S0022109017000308
DO - 10.1017/S0022109017000308
M3 - Article
AN - SCOPUS:85020532603
SN - 0022-1090
VL - 52
SP - 895
EP - 925
JO - Journal of Financial and Quantitative Analysis
JF - Journal of Financial and Quantitative Analysis
IS - 3
ER -