The Disciplinary Role of Takeovers
- 1 April 1988
- journal article
- Published by Oxford University Press (OUP) in The Review of Economic Studies
- Vol. 55 (2) , 185-199
- https://doi.org/10.2307/2297576
Abstract
This paper presents a theory of the disciplinary role of takeovers based on an explicit model of managerial incentive problems stemming from asymmetric information. It is argued that an informed raider can reduce incentive problems by making managerial compensation more sensitive to information unavailable to shareholders. The paper also highlights the importance of specifying the source of contractual inefficiencies when analyzing the effect of takeovers on incentives.Keywords
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