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Synergies and internal agency conflicts: the double-edged sword of mergers

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This paper investigates the interaction between synergies and internal agency conflicts in multidivision firms. In the presence of synergies, optimal decision rules concerning one division of a merged firm often depend on the other divisions' circumstances, inducing a link between the divisional managers' incentives to engage in internal agency activities. As a consequence, increasing organizational complexity may actually reduce the extent of internal agency conflicts

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en

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application/pdf

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http://flora.insead.edu/fichiersti_wp/inseadwp1997/97-88.pdf

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Copyright INSEAD. All rights reserved