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Reciprocal shareholding and takeover deterrence
Stockholm University, Faculty of Social Sciences, Department of Economics.ORCID iD: 0000-0003-0140-3031
1995 (English)In: International Journal of Industrial Organization, ISSN 0167-7187, E-ISSN 1873-7986, Vol. 13, no 3, p. 355-372Article in journal (Refereed) Published
Abstract [en]

Reciprocal shareholding has been argued to increase managerial power and facilitate takeover resistance. The latter may translate into higher premiums in the event of an actual takeover, thus benefiting shareholders, whereas increased influence over board decisions induces too high managerial compensation. The net effect is determined by the efficiency of the incumbent management relative to outside entrepreneurs. If the probability of receiving a tender offer is high, shareholders are likely to benefit from crosswise shareholdings. While symmetric increases in crosswise shareholdings unambiguously make takeovers more difficult, it is not true' that the effect on managerial compensation is always positive. The remuneration can be shown to be initially increasing but eventually it will decrease, approaching a lower bound.

Place, publisher, year, edition, pages
1995. Vol. 13, no 3, p. 355-372
Keywords [en]
Reciprocal shareholding, Takeover, Managerial compensation
National Category
Economics
Research subject
Economics
Identifiers
URN: urn:nbn:se:su:diva-163370DOI: 10.1016/0167-7187(94)00460-JOAI: oai:DiVA.org:su-163370DiVA, id: diva2:1274068
Available from: 2018-12-27 Created: 2018-12-27 Last updated: 2019-06-28Bibliographically approved

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