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Having more potential raiders weakens the takeover threat

  • Toolsema, Linda A.

    (Groningen University)

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    We argue in this paper that a more active market for corporate control may weaken the takeover threat. We show that an increase in the number of potential raiders tends to decrease the probability of a takeover. This in turn weakens managerial incentives. The lower managerial effort level that results in equilibrium negatively aspects the ex ante value of the firm.

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    File URL: http://irs.ub.rug.nl/ppn/248291408
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    Paper provided by University of Groningen, Research Institute SOM (Systems, Organisations and Management) in its series Research Report with number 03F16.

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    Date of creation: 2003
    Date of revision:
    Handle: RePEc:dgr:rugsom:03f16
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    1. Joseph E Harrington Jr, 2001. "A Simple Game-Theoretic Explanation for the Relationship Between Group Size and Helping," Economics Working Paper Archive 417, The Johns Hopkins University,Department of Economics.
    2. Haan, Marco & Riyanto, Yohanes, 1999. "The effects of takeover threats of shareholders and firm value," CCSO Working Papers 199912, University of Groningen, CCSO Centre for Economic Research.
    3. Elberfeld, Walter & Wolfstetter, Elmar, 1999. "A dynamic model of Bertrand competition with entry," International Journal of Industrial Organization, Elsevier, vol. 17(4), pages 513-525, May.
    4. Haan, Marco A. & Riyanto, Yohanes, 2006. "The effects of takeover threats on shareholders and firm value," Journal of Economic Behavior & Organization, Elsevier, vol. 59(1), pages 45-68, January.
    5. Kahn, Charles & Huberman, Gur, 1988. "Two-sided Uncertainty and "Up-or-Out" Contracts," Journal of Labor Economics, University of Chicago Press, vol. 6(4), pages 423-44, October.
    6. Simon P. Anderson & Maxim Engers, 2002. "A Beautiful Blonde: a Nash coordination game," Virginia Economics Online Papers 359, University of Virginia, Department of Economics.
    7. Marco A. Haan & Peter Kooreman, 2003. "How majorities can lose the election Another voting paradox," Social Choice and Welfare, Springer, vol. 20(3), pages 509-522, 06.
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