Title: A theory of takeovers and disinvestment
Description: "We present a real-options model of takeovers and disinvestment in declining industries.  As product demand declines, a first-best closure level is reached, where overall value is maximized by shutting down the .rm and releasing its capital to investors.  Absent takeovers, managers of unlevered firms always abandon the firm%u2019s business too late.  We model the managers%u2019 payout policy absent takeovers and consider the effects of golden parachutes and leverage on managers%u2019 shut-down decisions.  We analyze the effects of takeovers of under-leveraged firms.  Takeovers by raiders enforce first-best closure.  Hostile takeovers by other firms occur either at the first-best closure point or too early.  We also consider management buyouts and mergers of equals and show that in both cases closure happens inefficiently late"--National Bureau of Economic Research web site.
Subjects: Consolidation and merger of corporations, Disinvestment, Econometric models, Mathematical models