We argue in this paper that a more active market for corporate control may weaken the takeover threat. We show that an increase in the number of potential raiders tends to decrease the probability of a takeover. This in turn weakens managerial incentives. The lower managerial effort level that results in equilibrium negatively affects the ex ante value of the firm.
|Place of Publication||Groningen|
|Publisher||University of Groningen|
|Number of pages||26|
|Publication status||Published - 2003|