Managers, Workers, and Corporate Control
AbstractIf management has high private benefits and a small equity stake, managers and workers are natural allies against takeover threats. Two forces are at play. First, managers can transform employees into a "shark repellent" through long-term labor contracts and thereby reduce the firm's attractiveness to raiders. Second, employees can act as "white squires" for the incumbent managers. To protect their high wages, they resist hostile takeovers by refusing to sell their shares to the raider or by lobbying against the takeover. The model predicts that wages are inversely correlated with the managerial equity stake, and decline after takeovers. Copyright 2005 by The American Finance Association.
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Bibliographic InfoArticle provided by American Finance Association in its journal The Journal of Finance.
Volume (Year): 60 (2005)
Issue (Month): 2 (04)
Other versions of this item:
- Pagano, Marco & Volpin, Paolo, 2002. "Managers, Workers and Corporate Control," CEPR Discussion Papers 3649, C.E.P.R. Discussion Papers.
- Marco Pagano & Paolo Volpin, 2001. "Managers, Workers, and Corporate Control," CSEF Working Papers 75, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 09 Jan 2004.
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
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