Abstract
We show how CEO ownership and the market for corporate control interact to influence the investment-timing decisions of empire-building CEOs. The prospect of a future takeover means that CEOs with no ownership stake will over-invest in some types of projects and under-invest in others, but these problems are less severe when CEOs have an ownership stake. The value-maximizing level of CEO ownership depends on a firm's investment opportunities. Antitakeover laws that weaken a raider's position in a hostile takeover induce raiders to launch friendly takeovers sooner. The increased takeover threat induces CEOs to delay investing in positive NPV projects, but encourages them to take actions that initiate selling the firm when the takeover gains are high. Optimal ownership-generated incentives and the market for corporate control add more value after antitakeover laws are introduced, especially in situations when potential takeover gains are large.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
