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Agency theory and takeover defenses : an empirical analysis of target company management incentives in relation to shareholder concerns

by Hacker, Andrew B


The following study critically examines the actions and underlying incentives of public corporate governors in response to unsolicited tender offers. Using established theoretical frameworks, this thesis hypothesizes that takeover target managers and directors will tend to respond to personal financial incentives and risks in lieu of shareholder wealth concerns. Indeed, the past literature on the subject has mostly reflected this result; however, no recent study has determined conclusively if this trend is harmful to shareholders. Using methodology reflecting that of the successful past research, the empirical models test the explanatory power of the following variables on bid resistance by target firms over a sample of 64 tender offers spanning from 2004 to 2012: Hostility (defined as the intention of the bidder to replace target management), Bid Premium (the only variable of concern to shareholders), Managerial Wealth Change (a variable representing the immediate capital gains facing the top managers and directors as a result of the takeover) and Managerial Stock Ownership (as a percentage of total shares, and as the natural logarithm of total shares held by top managers and directors). The relationships highlighted by the data will be compared in their explanatory power and statistical significance to determine if shareholders, and thus the greater capital markets, should be concerned about the potential results of a misalignment of principal and agent incentives.


Includes bibliographical references.

Data set includes dates, names of targets and acquirers, share prices leading up to the takeovers, insider holdings information, synopses of many of the bids, and other pertinent data described in detail in the Data section of Chapter IV.

Microsoft Excel 2010, with results from Stata 11

Administrative Notes


Copyright restrictions apply.
Colorado College
Digital Origin
born digital
59 pages : illustrations
Senior Thesis -- Colorado College
Thesis Advisor
Laux, Judy
Economics and Business
Degree Name
Degree Type
Bachelor of Arts
Degree Grantor
Colorado College
Date Issued