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The Role of Executives in Hostile Takeover Attempts

Mohd Irfan ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper proposes a two-stage game theoretic model in which the discretionary power of executives acts as an implicit defense against hostile takeovers. Following managerial enterprise models, this paper analyzes the effects of target’s executives’ discretionary power over R&D and advertising in defeating hostile takeover attempts. It is shown that in vertically differentiated industries, in equilibrium, target’s executive keep low level of R&D and advertising to make their firm an unattractive target for hostile takeovers. The model reveals that the executives are influenced by their self-interest of monetary and non-monetary benefits and this self-interest behavior makes the industry less differentiated. Additionally, the firm’s takeover (hostile or friendly) is endogenously determined by the executives.

Keywords: Executives Discretion; Hostile Takeovers; Vertical Differentiation; R&D; Advertising (search for similar items in EconPapers)
JEL-codes: D03 G34 L15 (search for similar items in EconPapers)
Date: 2010-01-20, Revised 2010-04-15
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-com and nep-cwa
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Related works:
Journal Article: The role of executives in hostile takeover attempts (2011) Downloads
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