"Breach of Trust" in Takeovers and the Optimal Corporate Charter
AbstractThis paper analyzes how takeovers, various takeover defenses, and golden parachutes affect the value of target companies using an incomplete contracts framework. The author considers a raider who can improve the efficiency of production and appropriate rents of stakeholders of the company. Anticipating the expropriation of his rents, the manager's relationship specific investments will be too small, which may offset the value increase through the takeover. The simultaneous use of poison pills and golden parachutes can solve the underinvestment problem without forgoing profitable takeovers. However, the privately optimal level and composition of takeover defenses need not be socially efficient. Copyright 1995 by Blackwell Publishing Ltd.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Journal of Industrial Economics.
Volume (Year): 43 (1995)
Issue (Month): 3 (September)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-1821
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- Schnitzer, M., 1992. "Breach of Trust in Takeovers and the Optimal Corporate Charter," Working papers 92-10, Massachusetts Institute of Technology (MIT), Department of Economics.
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- Schmidt, Klaus M. & Schnitzer, Monika, 1993.
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Munich Reprints in Economics
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- Maug, Ernst, 1997. "Boards of directors and capital structure: Alternative forms of corporate restructuring," Journal of Corporate Finance, Elsevier, vol. 3(2), pages 113-139, April.
- Ralph P. Heinrich, 1999. "Complementarities in Corporate Governance. A Survey of the Literature with Special Emphasis on Japan," Kiel Working Papers 947, Kiel Institute for the World Economy.
- Kräkel, Matthias & Müller, Daniel, 2013. "Bad Mergers Revisited: An Incentive Perspective," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79914, Verein für Socialpolitik / German Economic Association.
- Iossa, Elisabetta & Legros, Patrick, 2001. "Third Party Monitoring and Golden Parachutes," CEPR Discussion Papers 2777, C.E.P.R. Discussion Papers.
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