Defensive Mechanisms and Managerial Discretion

Ronald Giammarino, Robert Heinkel and Burton Hollifield ()

Journal of Finance, 1997, vol. 52, issue 4, 1467-93

Abstract: The authors study a model where firms may possess free cash flow and takeovers may be disruptive. They show that the possibility of a takeover, combined with defensive mechanisms and the ability to pay greenmail, can solve the free cash flow problem in an efficient way. The payment of greenmail reveals information that generates a stock price decline that exceeds the value of the greenmail payment, even though the payment of greenmail is value maximizing. Optimal defensive measures limit takeover attempts if the target stock price is too low. The authors also provide cross-sectional implications of the analysis. Copyright 1997 by American Finance Association.

Date: 1997
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://links.jstor.org/sici?sici=0022-1082%2819970 ... O%3B2-P&origin=repec full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:52:y:1997:i:4:p:1467-93

Ordering information: This journal article can be ordered from
http://www.afajof.org/membership/join.asp

Access Statistics for this article

More articles in Journal of Finance from American Finance Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().