Takeover defenses, golden parachutes, and bargaining over stochastic synergy gains: a note on optimal contracting

Atreya Chakraborty (), Abdikarim Farah and John Barkoulas

The European Journal of Finance, 2008, vol. 14, issue 4, 273-280

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 (search for similar items in EconPapers)
Date: 2008
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DOI: 10.1080/13518470802041684

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