Golden Parachutes, Board and Committee Composition, and Shareholder Wealth

Posted: 16 Oct 1998

See all articles by Wallace N. Davidson

Wallace N. Davidson

Southern Illinois University - Department of Finance

Theodore Pilger

Southern Illinois University - Southern Illinois University at Carbondale

Andrew Szakmary

Southern Illinois University - Southern Illinois University at Carbondale

Abstract

Takeover defense mechanisms have become common for many modern corporations. In this research, we examine one potential takeover defense mechanism, golden parachutes. In particular, the relationship between the board of directors and the board committees and the question of whether the parachutes are aligned with shareholder interests or are a means of entrenching management is studied. Results show that the composition of the board of directors' compensation committee influences the market's perceived outcome of golden parachute adoption. When insiders and affiliated outsiders dominate the board's compensation committee negative returns are more likely to occur than when independent outsiders control the committee.

JEL Classification: G34

Suggested Citation

Davidson, Wallace N. and Pilger, Theodore Robert and Szakmary, Andrew, Golden Parachutes, Board and Committee Composition, and Shareholder Wealth. Available at SSRN: https://ssrn.com/abstract=127691

Wallace N. Davidson (Contact Author)

Southern Illinois University - Department of Finance ( email )

Mail Code 4626
Carbondale, IL 62901-4626
United States
618-453-1429 (Phone)
618-453-5626 (Fax)

Theodore Robert Pilger

Southern Illinois University - Southern Illinois University at Carbondale ( email )

Rehn Hall - Mail Code 4626
Carbondale, IL 62901-4515
United States
618-453-1429 (Phone)
618-453-5626 (Fax)

Andrew Szakmary

Southern Illinois University - Southern Illinois University at Carbondale ( email )

Rehn Hall - Mail Code 4626
Carbondale, IL 62901-4515
United States
618-453-2459 (Phone)
618-453-5626 (Fax)

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