Corporate takeovers, bargaining and managers' incentives to invest

Marcel Canoy, Yohanes E. Riyanto*, Patrick Van Cayseele

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review


This paper analyzes the impact of potential takeovers on the investment decisions of managers. The takeover involves bargaining over the potential surplus between the acquiring firm, the target manager, and shareholders of the target firm. The anticipation of future takeover gains will influence the decision-makers to invest ex ante. Interestingly, both over and underinvestment might prevail, depending on the relative bargaining powers of the parties. The model encompasses specific cases documented in the empirical literature and mergers and acquisitions (M&A) practice. It is, therefore, particularly suited to focus on the desirability of anti-takeover legislation.

Original languageEnglish
Pages (from-to)1-18
Number of pages18
JournalManagerial and Decision Economics
Issue number1
Publication statusPublished - Jan 2000
Externally publishedYes

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