RELATIONSHIP OF TAKEOVER GAINS TO THE STAKE OF MANAGERS IN THE ACQUIRING FIRM

Compensation shapes the interest of managers. Other things equal, a higher equity interest should ally management more closely to shareholders. This study compares managers' equity stake with shareholder gains in mergers. The amount of equity held by all officers and directors in the bidding firm is negatively related to the gain to shareholders in the target firm. However, no other comparisons show a systematic relationship between existing compensation arrangements and shareholder gains. © 1991.