Golden parachutes: Credible commitments or evidence of shirking?
AbstractExternal agents are frequently characterized as necessary for efficiency in team production settings. At the same time, these agents must be constrained from opportunistically exercising their enforcement capabilities. I argue that collective action costs and formal institutions (e.g., golden parachute agreements) can act as substitute factors in producing this constraint. The incidence of golden parachutes in a sample of S&P 500 firms is consistent with this conjecture: golden parachutes are more likely in firms with concentrated ownership. Interpreted in this light, golden parachutes enhance efficiency by increasing the credibility with which owners can commit against opportunism.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by EconWPA in its series Microeconomics with number 0311004.
Length: 20 pages
Date of creation: 16 Nov 2003
Date of revision:
Note: Type of Document - pdf; prepared on WinXP; pages: 20
Contact details of provider:
Web page: http://184.108.40.206
Credible commitment; Ownership structure;
Find related papers by JEL classification:
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-11-23 (All new papers)
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.:
- Alan J. Auerbach, 1988. "Corporate Takeovers: Causes and Consequences," NBER Books, National Bureau of Economic Research, Inc, number auer88-1.
- Agrawal, Anup & Knoeber, Charles R., 1996. "Firm Performance and Mechanisms to Control Agency Problems between Managers and Shareholders," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 31(03), pages 377-397, September.
- Peter Kennedy, 2003. "A Guide to Econometrics, 5th Edition," MIT Press Books, The MIT Press, edition 5, volume 1, number 026261183x, January.
- Holmstrom, Bengt, 1999. "The Firm as a Subeconomy," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(1), pages 74-102, April.
- Demsetz, Harold & Lehn, Kenneth, 1985. "The Structure of Corporate Ownership: Causes and Consequences," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1155-77, December.
- Andrei Shleifer & Lawrence H. Summers, 1989.
"Breach of Trust in Hostile Takeovers,"
NBER Working Papers
2342, National Bureau of Economic Research, Inc.
- Anup Agrawal & Charles R. Knoeber, . "Firm Performance and Mechanisms to Control Agency Problems between Managers and Shareholders (Revision of 29-94)," Rodney L. White Center for Financial Research Working Papers 8-96, Wharton School Rodney L. White Center for Financial Research.
- Schwartz, Steven, 1982. "Factors Affecting the Probability of Being Acquired: Evidence for the United States," Economic Journal, Royal Economic Society, vol. 92(366), pages 391-98, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).
If references are entirely missing, you can add them using this form.