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Antitakeover Measures, Golden Parachutes, and Target Firm Shareholder Welfare

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  • Ellie G. Harris
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    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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    Bibliographic 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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    Web page: http://www.rje.org

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    Cited by:
    1. McNeil, Chris & Niehaus, Greg & Powers, Eric, 2004. "Management turnover in subsidiaries of conglomerates versus stand-alone firms," Journal of Financial Economics, Elsevier, vol. 72(1), pages 63-96, April.
    2. Dirk Jenter & Katharina Lewellen, 2011. "CEO Preferences and Acquisitions," NBER Working Papers 17663, National Bureau of Economic Research, Inc.
    3. Lefanowicz, Craig E. & Robinson, John R. & Smith, Reed, 2000. "Golden parachutes and managerial incentives in corporate acquisitions: evidence from the 1980s and 1990s," Journal of Corporate Finance, Elsevier, vol. 6(2), pages 215-239, July.
    4. Haan, Marco A. & Riyanto, Yohanes, 2006. "The effects of takeover threats on shareholders and firm value," Journal of Economic Behavior & Organization, Elsevier, vol. 59(1), pages 45-68, January.
    5. Bebchuk, Lucian & Cohen, Alma & Wang, Charles C.Y., 2014. "Golden Parachutes and the Wealth of Shareholders," Journal of Corporate Finance, Elsevier, vol. 25(C), pages 140-154.
    6. Stráska, Miroslava & Waller, Gregory, 2010. "Do antitakeover provisions harm shareholders?," Journal of Corporate Finance, Elsevier, vol. 16(4), pages 487-497, September.
    7. Eisfeldt, Andrea L. & Rampini, Adriano A., 2008. "Managerial incentives, capital reallocation, and the business cycle," Journal of Financial Economics, Elsevier, vol. 87(1), pages 177-199, January.

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