The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Search results: 3.
Defensive Mechanisms and Managerial Discretion
Published: 04/18/2012 | DOI: 10.1111/j.1540-6261.1997.tb01117.x
RONALD GIAMMARINO, ROBERT HEINKEL, BURTON HOLLIFIELD
We study a model where firms may possess free cash flow and takeovers may be disruptive. We show that the possibility of a takeover, combined with defensive mechanisms and the ability to pay greenmail, can solve the free cash flow problem in an efficient way. The payment of greenmail reveals information that generates a stock price decline that exceeds the value of the greenmail payment, even though the payment of greenmail is value maximizing. Optimal defensive measures limit takeover attempts if the target stock price is too low. We also provide cross‐sectional implications of the analysis.
A Model of Dynamic Takeover Behavior
Published: 06/01/1986 | DOI: 10.1111/j.1540-6261.1986.tb05049.x
RONALD M. GIAMMARINO, ROBERT L. HEINKEL
Several observed features of takeover contests appear to be inconsistent with value‐maximizing behavior on the part of the agents involved. For instance, managers occasionally resist takeover bids, presumably in order to facilitate competition among bidders. However, counterbids do not always materialize, suggesting that management resistance was not in the best interests of the firm's shareholders. On the other hand, a successful takeover is sometimes accompanied by a decrease in the value of the acquirer's shares. In addition, valuable combinations are occasionally not consummated.
An Incentive Approach to Banking Regulation
Published: 09/01/1993 | DOI: 10.1111/j.1540-6261.1993.tb04766.x
RONALD M. GIAMMARINO, TRACY R. LEWIS, DAVID E. M. SAPPINGTON
We examine the optimal design of a risk‐adjusted deposit insurance scheme when the regulator has less information than the bank about the inherent risk of the bank's assets (adverse selection), and when the regulator is unable to monitor the extent to which bank resources are being directed away from normal operations toward activities that lower asset quality (moral hazard). Under a socially optimal insurance scheme: (1) asset quality is below the first‐best level, (2) higher‐quality banks have larger asset bases and face lower capital adequacy requirements than lower‐quality banks, and (3) the probability of failure is equated across banks.