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Reversions of Excess Pension Assets after Takeovers

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  • Jeffrey Pontiff
  • Andrei Shleifer
  • Michael S. Weisbach

Abstract

This article evaluates pension asset reversions as a source of takeover gains. In our sample of 413 takeovers, pension funds were reverted by 15.1% of acquirers in the two years following hostile takeovers compared to 8.4% in the two years following friendly takeovers. Reversions following takeovers tend to occur in unit-benefit plans, where the potential for wealth transfer is the greatest. These results are consistent with the view that hostile takeovers breach implicit contracts between firms and employees. We estimate that the reversions can on average explain approximately 11% of the takeover premium in cases where they actually occur. Reversions are too small to be the sole, or even dominant, source of takeover gains.

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Bibliographic Info

Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 21 (1990)
Issue (Month): 4 (Winter)
Pages: 600-613

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Handle: RePEc:rje:randje:v:21:y:1990:i:winter:p:600-613

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Cited by:
  1. Neumark, David & Song, Joanne, 2013. "Do stronger age discrimination laws make Social Security reforms more effective?," Journal of Public Economics, Elsevier, Elsevier, vol. 108(C), pages 1-16.
  2. Cocco, Joâo Francisco P.D. & Volpin, Paolo, 2005. "The Corporate Governance of Defined-Benefit Pension Plans: Evidence from the United Kingdom," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4932, C.E.P.R. Discussion Papers.
  3. Leora Friedberg & Michael Owyang, 2004. "Explaining the Evolution of Pension Structure and Job Tenure," NBER Working Papers 10714, National Bureau of Economic Research, Inc.
  4. David Neumark & Steven A. Sharpe, 1992. "Hostile Takeovers and Expropriation of Extramarginal Wages: A Test," NBER Working Papers 4101, National Bureau of Economic Research, Inc.
  5. Franklin Allen & Douglas Gale, 1994. "A welfare comparison of intermediaries and financial markets in Germany and the U.S," Working Papers 95-3, Federal Reserve Bank of Philadelphia.
  6. Mahoney, Joseph & Asher, Cheryl Carleton & Mahoney, James, 2004. "Towards a Property Rights Foundation for a Stakeholder Theory of the Firm," Working Papers, University of Illinois at Urbana-Champaign, College of Business 04-0116, University of Illinois at Urbana-Champaign, College of Business.
  7. Chemla, Gilles, 2005. "Hold-Up, Stakeholders and Takeover Threats," Economics Papers from University Paris Dauphine, Paris Dauphine University 123456789/4134, Paris Dauphine University.
  8. Leora Friedberg & Michael T. Owyang & Tara M. Sinclair, 2005. "Searching for Better Prospects: Endogenizing Falling Job Tenure and Private Pension Coverage," NBER Working Papers 11808, National Bureau of Economic Research, Inc.
  9. Jagadeesh Gokhale & Erica L. Groshen & David Neumark, 1993. "Do Hostile Takeovers Reduce Extramarginal Wage Payments?," NBER Working Papers 4346, National Bureau of Economic Research, Inc.
  10. Nuria Alcalde Fradejas & Inés Pérez-Soba Aguilar, 2007. "Influencia de las ofertas públicas de adquisición sobre el empleo de las empresas adquiridas: un análisis empírico," Investigaciones Economicas, Fundación SEPI, Fundación SEPI, vol. 31(1), pages 5-42, January.
  11. Li, Xiaoyang, 2013. "Productivity, restructuring, and the gains from takeovers," Journal of Financial Economics, Elsevier, Elsevier, vol. 109(1), pages 250-271.
  12. Clinch, Greg & Shibano, Toshi, 1996. "Differential tax benefits and the pension reversion decision," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 21(1), pages 69-106, February.
  13. Mahoney, Joseph T., 2012. "Towards a Stakeholder Theory of Strategic Management," Working Papers, University of Illinois at Urbana-Champaign, College of Business 12-0100, University of Illinois at Urbana-Champaign, College of Business.
  14. Chemla, Gilles, 2005. "Hold-up, stakeholders and takeover threats," Journal of Financial Intermediation, Elsevier, Elsevier, vol. 14(3), pages 376-397, July.
  15. Shapiro, B. P., 1998. "Toward a normative model of rational argumentation for critical accounting discussions," Accounting, Organizations and Society, Elsevier, vol. 23(7), pages 641-663, October.

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