Is the more able manager always safer from takeover?
It's commonly believed that managers with higher ability would be less likely to be taken over. We set out a model, which is built on Zwiebel (1996), to show that there is no monotonic relationship between manager's ability and the probability of being taken over. A manager with relatively high ability would be taken over since this manager cannot commit to renegotiating debt contract with the creditor after taking on a bad project; anticipating this, the raider would take over the firm and remove the high-ability manager in the first place.
Year of publication: |
2010
|
---|---|
Authors: | Cai, Mingchao ; Li, Yue ; Wang, Yongxiang ; Xu, Rong |
Published in: |
Economic Modelling. - Elsevier, ISSN 0264-9993. - Vol. 27.2010, 1, p. 28-31
|
Publisher: |
Elsevier |
Keywords: | Takeover Managerial entrenchment Credible commitment Renegotiation-proof |
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