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Antitakeover Measures, Golden Parachutes, and Target Firm Shareholder Welfare

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Author Info
Ellie G. Harris
Abstract

Adopting antitakeover measures can enable the shareholders of a target firm to increase their share of any synergy gains expected to result from combining their firm with a bidder. Adopting such measures enhances the bargaining power of the target's manager, who will be a tougher bargainer than the nonmanagerial shareholders will, owing to his expected loss of his job following the target's acquisition. If the manager's expected loss of utility is very large, target firm shareholders may maximize their takeover-related gain by both adopting antitakeover measures and awarding the manager a golden parachute of the optimal size.

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

Volume (Year): 21 (1990)
Issue (Month): 4 (Winter)
Pages: 614-625
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Handle: RePEc:rje:randje:v:21:y:1990:i:winter:p:614-625

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  1. Elijah Brewer, III & William E. Jackson, III & Larry D. Wall, 2006. "When target CEOs contract with acquirers: evidence from bank mergers and acquisitions," Working Paper 2006-28, Federal Reserve Bank of Atlanta. [Downloadable!]
  2. Filippo Ippolito, 2005. "Takeover Defenses, Firm-Specific Skills and Managerial Entrenchment," OFRC Working Papers Series 2005fe13, Oxford Financial Research Centre. [Downloadable!]
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