A Theory of the Optimal Cost Barrier to Corporate Takeovers
AbstractThis paper characterizes financial and employment contracts in the presence of both worker moral hazard and the threat of opportunistic takeovers. Firms in which worker efforts or specific investments are of greater importance are shown to exhibit a greater degree of deferred compensation, supported by governance structures that allow managers to resist hostile takeovers more vigorously. This effect is most pronounced in firms where workers 'pay for their job' by accepting low wages early in their careers. Firms in which large deferred payments cannot be offset by low starting wages will offer less resistance to a hostile bidder. Copyright 1997 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
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Bibliographic InfoArticle provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.
Volume (Year): 38 (1997)
Issue (Month): 3 (August)
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Web page: http://www.econ.upenn.edu/ier
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- Chemla, Gilles, 2004. "Takeovers and the dynamics of information flows," Economics Papers from University Paris Dauphine 123456789/6359, Paris Dauphine University.
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"Executive pay in Japan: the role of bank-appointed monitors and the Main Bank relationship,"
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