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Do Envious CEOs Cause Merger Waves?

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THE 7TH SIN OF DEALMAKING
Two business school professors want to know: “If CEOs envy each other based on relative compensation and CEOs of bigger firms get paid more, then a merger in the industry that increases firm size for one CEO will cause other envious CEOs to be tempted to undertake value-dissipating but size-enhancing acquisitions, thereby starting a merger wave.” They find strong empirical support for it. Is this why investment bankers feed the egos of their corporate clients?

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