Fortune Favors the Bold

• Main Authors: Meneghetti, Costanza, Williams, Ryan
• Other Authors: Univ Arizona, Eller Coll Management
• Language: en
• Published: CAMBRIDGE UNIV PRESS 2017
• Online Access: http://hdl.handle.net/10150/624691; http://arizona.openrepository.com/arizona/handle/10150/624691

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.