Takeover defenses,golden parachutes,and bargaining over stochastic synergy gains: a note on optimal contracting |
| |
| Authors: | Atreya Chakraborty Abdikarim Farah |
| |
| Institution: | 1. Accounting and Finance Department , College of Management, University of Massachusetts , Boston, MA, USA;2. International Monetary Fund , Washington, DC, USA |
| |
| Abstract: | We incorporate managerial risk aversion and stochasticity of takeover synergy gains into Harris’ (Harris, E.G. 1990. Antitakeover measures, golden parachutes, and target firm shareholder welfare. Rand Journal of Economics 21, no. 4: 614–25. bargaining model for the coexistence of antitakeover defenses and golden parachutes in corporate charters. We show that: (i) it is not always optimal that the target-firm shareholders adopt antitakeover defenses, (ii) the size of the golden parachute is proportional to the riskiness of the synergistic gains, and (iii) the target-firm shareholders are unequivocally better-off with golden parachutes than takeover-contingent stock options. |
| |
| Keywords: | golden parachutes antitakeover defenses tender offers mergers and acquisitions |
|
|
