Managers, Workers, and Corporate Control
AbstractIf management has high private benefits and owns a small equity stake, managers and workers are natural allies against a takeover threat. Two forces are at play. First, managers can transform employees into a "shark repellent" through long-term labor contracts and thereby reduce the firm's attractiveness to a raider. Second, employees can act as ``white squires''\ for the incumbent managers: to protect their high wages, they resist hostile takeovers, by refusing to sell their shares to the raider or by lobbying against the takeover. The model predicts that wages are inversely correlated with the incumbent's equity stake, and decline after a takeover
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Bibliographic InfoPaper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 75.
Date of creation: 01 Dec 2001
Date of revision: 09 Jan 2004
Publication status: Published in The Journal of Finance, Vol. 60, No. 2, April 2005, pages 841-868
Note: Winner of the 2005 Egon Zehnder International Prize for the best paper in the ECGI Finance Working Paper series, and nominated for the 2005 Brattle Prize.
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More information through EDIRC
industrial relationships; private benefits; political economy; shareholder protection; corporate governance; employment protection; takeovers;
Other versions of this item:
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-02-10 (All new papers)
- NEP-LAB-2002-02-10 (Labour Economics)
- NEP-LAW-2002-02-10 (Law & Economics)
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