search query: @author Giammarino, R. / total: 1
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| Author: | Giammarino, R. Heinkel, R. Hollifield, B. |
| Title: | Defensive mechanisms and managerial discretion |
| Journal: | Journal of Finance
1997 : SEP, VOL. 52:4, p. 1467-1493 |
| Index terms: | MANAGERIAL ACTIVITIES DEFENCE CASH FLOW MERGERS |
| Language: | eng |
| Abstract: | Management actions that result in stock price reductions are sometimes offered as evidence that management is entrenched and acting in its own best interest at the expense of shareholders. This study shows that this interpretation may be incorrect. In this model greenmail is offered in response to a takeover attempt in order to convince the raider that a takeover would be excessively disruptive. In equilibrium the greenmail payment exceeds the fair value of the raider's shares by more than the perks available to an entrenched manager. The second point of the study is to show how ex ante defensive mechanisms can be used to manage the occurrence of the raid. The third point is that a combination of ex ante and ex post defensive mechanisms can be more efficient than a simple ex ante disciplinary mechanism. |
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