Workshop Series: Mark Humphrey-Jenner
This paper shows that ATPs can reduce agency conflicts of managerial risk aversion in `hard-to-value' companies. Hard-to-value (HtV) companies might have depressed prices due to valuation difficulties, rather than managerial under-performance. This might expose HtV companies to an opportunistic takeover, and create agency conflicts of managerial risk aversion. I show that ATPs can ameliorate this. Specically, I show that that ATPs enable managers of hard to value firms to make value-creating acquisitions and encourage value-creating innovation, and that ATPs do not insulate managers of HtV firms from disciplinary takeovers.
Keywords: Takeovers; Acquisitions; Valuation; Governance; Managerial Risk Aversion; Innovation
JEL Classification: G34, G38, K22, O31, O32