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Corporate takeovers, bargaining and managers' incentives to invest

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Author Info
Marcel Canoy (Netherlands Central Planning Bureau, Van Stolkweg 14, The Hague, Netherlands)
Yohanes E. Riyanto (Center for Economic Studies, Katholieke Universiteit Leuven, Belgium)
Patrick Van Cayseele (Center for Economic Studies, Katholieke Universiteit Leuven, Belgium)

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Abstract

This paper analyzes the impact of potential takeovers on the investment decisions of managers. The takeover involves bargaining over the potential surplus between the acquiring firm, the target manager, and shareholders of the target firm. The anticipation of future takeover gains will influence the decision-makers to invest ex ante. Interestingly, both over and underinvestment might prevail, depending on the relative bargaining powers of the parties. The model encompasses specific cases documented in the empirical literature and mergers and acquisitions (M&A) practice. It is, therefore, particularly suited to focus on the desirability of anti-takeover legislation. Copyright © 2000 John Wiley & Sons, Ltd.

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Publisher Info
Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

Volume (Year): 21 (2000)
Issue (Month): 1 ()
Pages: 1-18
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Handle: RePEc:wly:mgtdec:v:21:y:2000:i:1:p:1-18

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Mitchell Berlin, 1998. "That thing venture capitalist do," Business Review, Federal Reserve Bank of Philadelphia, issue Jan, pages 15-26. [Downloadable!]
  2. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 1-29, February.
    Other versions:
  3. Kaplan, Steven, 1989. "The effects of management buyouts on operating performance and value," Journal of Financial Economics, Elsevier, vol. 24(2), pages 217-254. [Downloadable!] (restricted)
  4. Narayanan, M P, 1985. " Managerial Incentives for Short-term Results," Journal of Finance, American Finance Association, vol. 40(5), pages 1469-84, December. [Downloadable!] (restricted)
  5. Frank R. Lichtenberg & Donald Siegel, 1991. "The Effects of Leveraged Buyouts on Productivity and Related Aspects of Firm Behavior," NBER Working Papers 3022, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Meulbroek, Lisa K, et al, 1990. "Shark Repellents and Managerial Myopia: An Empirical Test," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1108-17, October. [Downloadable!] (restricted)
  7. Schnitzer, Monika, 1995. ""Breach of Trust" in Takeovers and the Optimal Corporate Charter," Journal of Industrial Economics, Blackwell Publishing, vol. 43(3), pages 229-59, September. [Downloadable!] (restricted)
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  8. 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)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Christos Cabolis & Constantine Manasakis & Emmanuel Petrakis, 2008. "Horizontal Mergers and Acquisitions with Endogenous Efficiency Gains," Working Papers 0817, University of Crete, Department of Economics. [Downloadable!]
  2. M. Pilar Socorro, 2009. "R&D investment as a signal in corporate takeovers," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 30(5), pages 335-350. [Downloadable!]
  3. M. Pilar Socorro, 2004. "R&D investment as a signal in corporate takeovers," Documentos de trabajo conjunto ULL-ULPGC 2004-07, Facultad de Ciencias Económicas de la ULPGC. [Downloadable!]
  4. Pr. D. Patrick Van Cayseele, 2002. "Investment, R&D and liquidity constraints," Research series 200205-14, National Bank of Belgium. [Downloadable!]
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