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Do firm and state antitakeover provisions affect how well CEOs earn their pay?

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  • Scott W. Barnhart

    (Florida Atlantic University, Boca Raton, FL, USA)

  • Michael F. Spivey

    (Clemson University, Clemson, SC, USA)

  • John C. Alexander

    (Clemson University, Clemson, SC, USA)

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    Abstract

    The relationship between CEO pay-adjusted firm performance and firm-specific antitakeover amendments and state antitakeover laws is examined. The findings suggest that the potential entrenchment resulting from the reduced threat of external control provided by antitakeover provisions may allow the CEO to deliver a lower level of firm performance relative to their compensation. At first glance, the state antitakeover provisions appear to be insignificant in the presence of firm-specific amendments. However, further analysis reveals they can play an important role, in some cases reinforcing the effects of the firm-specific amendments. With respect to the firm-specific amendments, the negative relation is associated with the presence of blank check preferred stock and poison pill amendments. Copyright © 2000 John Wiley & Sons, Ltd.

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    File URL: http://hdl.handle.net/10.1002/mde.992
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    Bibliographic Info

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

    Volume (Year): 21 (2000)
    Issue (Month): 8 ()
    Pages: 315-328

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    Handle: RePEc:wly:mgtdec:v:21:y:2000:i:8:p:315-328

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

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    1. Laurence Schumann, 1988. "State Regulation of Takeovers and Shareholder Wealth: The Case of New York's 1985 Takeover Statutes," RAND Journal of Economics, The RAND Corporation, vol. 19(4), pages 557-567, Winter.
    2. Garen, John E, 1994. "Executive Compensation and Principal-Agent Theory," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1175-99, December.
    3. Anup Agrawal & Anil K. Makhija & Gershon Mandelker, 1991. "Executive Compensation and Corporate Performance in Electric and Gas Utilities," Financial Management, Financial Management Association, vol. 20(4), Winter.
    4. Jensen, M.C. & Murphy, K.J., 1988. "Performance Pay And Top Management Incentives," Papers 88-04, Rochester, Business - Managerial Economics Research Center.
    5. Brickley, James A. & Coles, Jeffrey L. & Terry, Rory L., 1994. "Outside directors and the adoption of poison pills," Journal of Financial Economics, Elsevier, vol. 35(3), pages 371-390, June.
    6. McConnell, John J. & Servaes, Henri, 1990. "Additional evidence on equity ownership and corporate value," Journal of Financial Economics, Elsevier, vol. 27(2), pages 595-612, October.
    7. Kahle, Kathleen M. & Walkling, Ralph A., 1996. "The Impact of Industry Classifications on Financial Research," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 31(03), pages 309-335, September.
    8. Jennifer J. Gaver & Kenneth M. Gaver, 1995. "Compensation Policy and the Investment Opportunity Set," Financial Management, Financial Management Association, vol. 24(1), Spring.
    9. Lippert, Robert L & Moore, William T, 1994. "Compensation Contracts of Chief Executive Officers: Determinants of Pay-Performance Sensitivity," Journal of Financial Research, Southern Finance Association & Southwestern Finance Association, vol. 17(3), pages 321-32, Fall.
    10. Kathleen M. Kahle & Ralph A. Walkling, . "The Impact of Industry Classifications on Financial Research," Research in Financial Economics 9607, Ohio State University.
    11. Alexander, John C. & Spivey, Michael F. & Wayne Marr, M., 1997. "Nonshareholder constituency statutes and shareholder wealth: A note," Journal of Banking & Finance, Elsevier, vol. 21(3), pages 417-432, March.
    12. Morck, Randall & Shleifer, Andrei & Vishny, Robert W., 1988. "Management ownership and market valuation : An empirical analysis," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 293-315, January.
    13. Pound, John, 1992. "On the Motives for Choosing a Corporate Governance Structure: A Study of Corporate Reaction to the Pennsylvania Takeover Law," Journal of Law, Economics and Organization, Oxford University Press, vol. 8(3), pages 656-72, October.
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