This Research Spotlight provides a summary of the academic literature on how golden parachute payments influence CEO incentives to pursue mergers and acquisitions. It reviews the evidence of: Shareholder reaction to the implementation of golden parachutes, the relation between golden parachutes and the likelihood of an acquisition, the relation between golden parachutes and takeover premiums, the relation between golden parachutes and management entrenchment, and the relation between unscheduled stock option grants and golden parachutes. This Research Spotlight expands upon issues introduced in the Quick Guide “The Market for Corporate Control.”
Copyright held by David F. Larcker and Brian Tayan. Further inquiries about reproduction and use should be directed to the Corporate Governance Research Initiative.
