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Takeover Defenses and Dilution: A Welfare Analysis

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Author Info
Chakraborty, Atreya
Arnott, Richard

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Abstract

Existing theory suggests that, in an unregulated market for corporate control, the level of takeovers is suboptimal because shareholders do not receive the full benefit from them. However, existing theory neglects that the threat of takeover may divert managerial effort from productive to defensive activities. This paper shows that, when this is considered, takeovers may, in fact, be excessive.

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Publisher Info
Article provided by Cambridge University Press in its journal Journal of Financial and Quantitative Analysis.

Volume (Year): 36 (2001)
Issue (Month): 03 (September)
Pages: 311-334
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Handle: RePEc:cup:jfinqa:v:36:y:2001:i:03:p:311-334_00

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  1. Brian J. Hall & Jeffrey B. Liebman, 1998. "Are CEOs Really Paid Like Bureaucrats?," The Quarterly Journal of Economics, MIT Press, vol. 113(3), pages 653-691, August. [Downloadable!] (restricted)
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  2. Denis, David J, 1990. " Defensive Changes in Corporate Payout Policy: Share Repurchases and Special Dividends," Journal of Finance, American Finance Association, vol. 45(5), pages 1433-56, December. [Downloadable!] (restricted)
  3. Bradley, Michael & Desai, Anand & Kim, E. Han, 1988. "Synergistic gains from corporate acquisitions and their division between the stockholders of target and acquiring firms," Journal of Financial Economics, Elsevier, vol. 21(1), pages 3-40, May. [Downloadable!] (restricted)
  4. Dann, Larry Y. & DeAngelo, Harry, 1988. "Corporate financial policy and corporate control : A study of defensive adjustments in asset and ownership structure," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 87-127, January. [Downloadable!] (restricted)
  5. Sanford J. Grossman & Oliver D. Hart, 1980. "Takeover Bids, the Free-Rider Problem, and the Theory of the Corporation," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 42-64, Spring. [Downloadable!] (restricted)
  6. Shleifer, Andrei & Vishny, Robert W., 1989. "Management entrenchment : The case of manager-specific investments," Journal of Financial Economics, Elsevier, vol. 25(1), pages 123-139, November. [Downloadable!] (restricted)
  7. Bagwell, Laurie Simon, 1992. " Dutch Auction Repurchases: An Analysis of Shareholder Heterogeneity," Journal of Finance, American Finance Association, vol. 47(1), pages 71-105, March. [Downloadable!] (restricted)
  8. Paul Bolster & Don Chance & Don Rich, 1996. "Executive Equity Swaps and Corporate Insider Holdings," Financial Management, Financial Management Association, vol. 25(2), Summer.
  9. Scharfstein, David, 1988. "The Disciplinary Role of Takeovers," Review of Economic Studies, Blackwell Publishing, vol. 55(2), pages 185-99, April. [Downloadable!] (restricted)
  10. Jensen, Michael C & Murphy, Kevin J, 1990. "Performance Pay and Top-Management Incentives," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 225-64, April. [Downloadable!] (restricted)
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