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The Effect of Golden Parachutes on Shareholder Wealth and Takeover Probabilities

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  • Pamela L. Hall
  • Dwight C. Anderson

Abstract

This study seeks to determine whether stockholders experience increases in wealth due to a company's adoption of a golden parachute and resulting increased takeover bid probability. Market reaction to golden parachute adoption is examined by employing event analysis, logit analysis and metric regression. Our findings indicate that the adoption of a golden parachute does not signify an increased probability of a takeover bid, and stockholders experience a decrease in wealth.

Suggested Citation

  • Pamela L. Hall & Dwight C. Anderson, 1997. "The Effect of Golden Parachutes on Shareholder Wealth and Takeover Probabilities," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 24(3), pages 445-463, April.
    • Handle: RePEc:bla:jbfnac:v:24:y:1997:i:3:p:445-463
    DOI: 10.1111/1468-5957.00114
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    Cited by:

    1. 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.
    2. Maskara, Pankaj K. & Miller, Laura S., 2018. "Do golden parachutes matter? Evidence from firms that ultimately filed for bankruptcy," The Quarterly Review of Economics and Finance, Elsevier, vol. 67(C), pages 63-78.
    3. Espahbodi, Hassan & Espahbodi, Pouran, 2003. "Binary choice models and corporate takeover," Journal of Banking & Finance, Elsevier, vol. 27(4), pages 549-574, April.

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