A note on takeovers and the market value rule |
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Authors: | Jacques A Schnabel |
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Institution: | (1) The University of Calgary, USA |
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Abstract: | Summary It was shown that a popular model of capital market equilibrium implies that firm share demand curves are downward sloping. From this it was inferred that the potential goal divergence between management and shareholders is not necessarily removed by the threat of takeovers. Thus, nothing short of transforming management into shareholders via the device of share options may be effective in ensuring compatible financial criteria. |
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