The Role of Executives in Hostile Takeover Attempts
This paper proposes a two-stage game theoretic model in which the discretionary power of executives acts as an implicit defense against hostile takeovers. Following managerial enterprise models, this paper analyzes the effects of target’s executives’ discretionary power over R&D and advertising in defeating hostile takeover attempts. It is shown that in vertically differentiated industries, in equilibrium, target’s executive keep low level of R&D and advertising to make their firm an unattractive target for hostile takeovers. The model reveals that the executives are influenced by their self-interest of monetary and non-monetary benefits and this self-interest behavior makes the industry less differentiated. Additionally, the firm’s takeover (hostile or friendly) is endogenously determined by the executives.
|Date of creation:||20 Jan 2010|
|Date of revision:||15 Apr 2010|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
References listed on IDEAS
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.:
- Schnitzer, Monika, 1996.
"Hostile versus Friendly Takeovers,"
London School of Economics and Political Science, vol. 63(249), pages 37-55, February.
- Monika Schnitzer, "undated". "Hostile Versus Friendly Takeovers," Discussion Paper Serie A 297, University of Bonn, Germany.
- Schnitzer,Monika, 1990. "Hostile versus friendly takeovers," Discussion Paper Serie A 299, University of Bonn, Germany.
- Schnitzer, Monika, 1996. "Hostile versus friendly takeovers," Munich Reprints in Economics 19895, University of Munich, Department of Economics.
- Schnitzer,Monika, 1991. "Hostile versus friendly takeovers," Discussion Paper Serie A 339, University of Bonn, Germany.
- Randall Morck & Andrei Shleifer & Robert W. Vishny, 1987. "Characteristics of Hostile and Friendly Takeover Targets," NBER Working Papers 2295, National Bureau of Economic Research, Inc.
- Deroian, Frederic & Gannon, Frederic, 2006. "Quality-improving alliances in differentiated oligopoly," International Journal of Industrial Organization, Elsevier, vol. 24(3), pages 629-637, May.
- Frédéric Deroïan & Frédéric Gannon, 2006. "Quality-improving alliances in differentiated oligopoly," Post-Print halshs-00369724, HAL.
- Frédéric Deroian & Frédéric Gannon, 2006. "Quality-improving alliances in differentiated oligopoly," Post-Print halshs-00084891, HAL.
- Henry G. Manne, 1965. "Mergers and the Market for Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 73, pages 110-110.
- Motta, Massimo, 1993. "Endogenous Quality Choice: Price vs. Quantity Competition," Journal of Industrial Economics, Wiley Blackwell, vol. 41(2), pages 113-131, June.
- Pearce II, John A. & Robinson, Richard Jr., 2004. "Hostile takeover defenses that maximize shareholder wealth," Business Horizons, Elsevier, vol. 47(5), pages 15-24.
- Franks, Julian & Mayer, Colin, 1996. "Hostile takeovers and the correction of managerial failure," Journal of Financial Economics, Elsevier, vol. 40(1), pages 163-181, January.
- Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-329, May.
- Avner Shaked & John Sutton, 1982. "Relaxing Price Competition Through Product Differentiation," Review of Economic Studies, Oxford University Press, vol. 49(1), pages 3-13.
- Bloch, Francis & Manceau, Delphine, 1999. "Persuasive advertising in Hotelling's model of product differentiation," International Journal of Industrial Organization, Elsevier, vol. 17(4), pages 557-574, May.
- Berkovitch, Elazar & Narayanan, M. P., 1993. "Motives for Takeovers: An Empirical Investigation," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 28(03), pages 347-362, September.
- Jaskold Gabszewicz, J. & Thisse, J. -F., 1979. "Price competition, quality and income disparities," Journal of Economic Theory, Elsevier, vol. 20(3), pages 340-359, June.
- GABSZEWICZ, Jean J. & THISSE, Jacques-François, "undated". "Price competition, quality and income disparities," CORE Discussion Papers RP 370, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Henry G. Manne, 1965. "Mergers and the Market for Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 73, pages 351-351.
- Sanford J. Grossman & Oliver D. Hart, 1980. "Takeover Bids, the Free-Rider Problem, and the Theory of the Corporation," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 42-64, Spring.
- Hackner, Jonas, 1994. "Collusive pricing in markets for vertically differentiated products," International Journal of Industrial Organization, Elsevier, vol. 12(2), pages 155-177, June.
- Harris, Milton & Raviv, Artur, 1988. "Corporate control contests and capital structure," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 55-86, January. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:22123. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If references are entirely missing, you can add them using this form.