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Accepted (AM)Open Access (License Unspecified), Open
Journal article
On the Importance of Golden Parachutes
Journal of financial and quantitative analysis, v 48(6), pp 1717-1753
01 Dec 2013
Abstract
In acquisitions, target chief executive officers (CEOs) face a moral hazard: Any personal gain from the deal could be offset by the loss of the future compensation stream associated with their jobs. Larger, more important parachutes provide greater relief for these losses. To explicitly measure the moral hazard target CEOs face, we standardize the parachute payment by the expected value of their acquisition-induced lost compensation. We examine 851 acquisitions from 1999-2007, finding that more important parachutes benefit target shareholders through higher completion probabilities. Conversely, as parachute importance increases, target shareholders receive lower takeover premia, while acquirer shareholders capture additional rents from target shareholders.
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Details
- Title
- On the Importance of Golden Parachutes
- Creators
- Eliezer M. Fich - efich@drexel.edu,Anh L. Tran - City, University of LondonRalph A. Walkling - rw@drexel.edu, LeBow College of Business, 3141 Chestnut St, Philadelphia, PA 19104
- Publication Details
- Journal of financial and quantitative analysis, v 48(6), pp 1717-1753
- Publisher
- Cambridge Univ Press
- Number of pages
- 37
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Finance
- Web of Science ID
- WOS:000336519400003
- Scopus ID
- 2-s2.0-84890370551
- Other Identifier
- 991019167896604721
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- Collaboration types
- Domestic collaboration
- International collaboration
- Web of Science research areas
- Business, Finance
- Economics