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This research uses accounting information to supplement abnormal returns evidence in order to gauge the performance of greenmailed firms. Our results support the management entrenchment hypothesis; target firm earnings are poor relative to industry in the years surrounding the greenmail event, and earnings do not significantly improve as would be expected under the shareholders' interest hypothesis. This result holds after adjusting for greenmail premia net of tax effects. Evidence on investment spending suggests firms that pay greenmail differ substantially from their industries, but in a negative direction. In contrast, the industry‐adjusted earnings of non‐greenmail repurchasing firms are significantly greater than the earnings of greenmailed firms. Together, these results are consistent with the contention that greenmailed firms are not managed in shareholders' interests; they underperform their industry, the poor operating results are not attributable to higher investment outlays associated with a long‐term strategic focus, and performance does not improve. This is consistent with observed negative abnormal returns being attributable to both a lost takeover premium and a lost opportunity for improved corporate performance.

This study seeks to analyze the differences between merger cancellations and three types of takeover failures: failures that are associated with targeted share repurchases (greenmail), failures in which the sole bidder simply withdraws the offer, and failures that are accompanied by a general share repurchase (buyback).

The paper uses event study methods and regression analysis.

The paper observes negative target stock price reactions around all types of takeover failures and merger cancellations. However, the cumulative effect of takeover attempts is positive, suggesting that even unsuccessful tender offers generate permanent gains to target firm shareholders, while the cumulative effect of canceled mergers is negative. Furthermore, the market reaction to greenmail‐induced takeover failure announcements is no worse than that of voluntary withdrawals, suggesting that greenmail may play an efficient role in mitigating the effects of takeover bid withdrawals. Finally, while bidder wealth is destroyed in takeover failures, the effect of merger cancellations on bidders is considerably more devastating.

The paper provides evidence of negative stock price reactions to all forms of merger failure. The paper also shows that the cumulative effect of all types of takeover failures is still positive: suggesting that being put into play is still beneficial overall but that canceled mergers destroy value for both targets and bidders. The paper shows that the market reaction to greenmail‐induced failure announcements is no worse than other forms of failure. Finally, while there is an immediate downturn in target prices around a failure, the negative outcome is more severe for the bidders. Thus, the market sees that there was something useful about the anticipated change in corporate control, which was lost when it failed to be completed.

Presents a preliminary assessment of the moral implications of hostile takeovers. Argues that prevalent verdicts are premature, and that we should withhold judgement in this regard because there is, as yet, no principled way of adjudicating his opposing positions on the morality of “unfriendly acquisitions”.

This paper presents evidence that the valuation consequences of targeted share repurchase announcements are positively related to the size of the firms' pre‐repur‐chase free cash flows and to the firms' pre‐repurchase build‐up of liquid assets. The paper further reports that the level of liquid assets declines permanently following the share repurchases. The results suggest that a share repurchase is a viable means to cut down surplus cash and that such decision can increase shareholder wealth by reducing agency costs of free cash flows.

Innovations in takeover financing, less restrictive regulatory requirements, and a general desire to enhance market position have led to a substantial increase in corporate takeover and restructuring activity. In response target firm managers have become increasingly active in devising defensive strategies and tactics designed to ward off hostile bidders. It is well‐ documented, however, that large wealth gains accrue to target firm shareholders in mergers and acquisitions. Thus the emergence of such terms as “shark repellents”, “poison pills”, and “greenmail”, raises the question of whose best interests are really being served by antitakeover measures.

This case is set in the midst of the attempted takeover of Walt Disney Productions by the raider Saul Steinberg in June 1984. Disney's chief executive officer ponders whether to fight the takeover or to pay “greenmail”. One significant influence on the decision is the “true” value of the firm. The case offers, either directly or through analysis of it, several estimates of value. The valuation question invites a review of Disney's past performance and current competitive position. Other significant influences on the decision are the ethics and economics of paying greenmail. The rich range of issues raised in the case (strategy, valuation, performance measurement, and ethics) makes it an effective first case, review case, or final exam in a corporate-finance course. A student worksheet file is available for use with this case.

Takeovers play an important role in the allocation of re‐sources to the most efficient uses and represent a mech‐anism by which corporate resources are transferred from one management team to another (Jensen and Ruback, 1983). A result of this managerial displacement is expected to be an increase in shareholder wealth. This argument pre‐supposes that managers attempting takeovers are motivated to create value for shareholders. This picture of managerial disinterestedness in the service of share‐holders ignores potential agency conflicts between man‐agers and shareholders. When faced with a takeover bid, which if successful may lead to its own displacement, the management team at the target may devise ways of frus‐trating the bid.

The different types and characteristics of mergers and acquisitions are examined, and some defensive and offensive strategies and tactics explained. Reasons for mergers and takeovers are also dealt with. The article includes a glossary of terms, an example of a summary of Rights to Purchase for a corporation (Bell Atlantic) and three case examples of merger and takeover (Chrysler/AMC′s friendly merger; Shamrock′s hostile and unsuccessful bid for Polaroid; and Campeau′s takeover of Federated Department Stores).

Shareholders are the entire reason for a company's existence. But more often than not, they are the forgotten people in Corporate America.

Shareholders are demanding that firms change their ownership and corporate governance structures to improve accountability and corporate performance. This study examined the influence of ownership and governance on entry mode selection, considered a key decision for international firms and one with important financial implications. Results indicate that owner control is related to the selection of higher risk and higher control forms of entry. Partial support was found for the effects of other governance mechanisms.