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Full-Text Articles in Law
Ceo Side Payments In Mergers And Acquisitions, Brian J. Broughman
Ceo Side Payments In Mergers And Acquisitions, Brian J. Broughman
Articles by Maurer Faculty
In addition to golden parachutes, CEOs often negotiate for personal side-payments in connection with the sale of their firm. Side-payments differ from golden parachutes in that they are negotiated ex post in connection with a specific acquisition proposal, whereas golden parachutes are part of the executive’s employment agreement negotiated when she is hired. While side-payments may benefit shareholders by countering managerial resistance to an efficient sale, they can also be used to redistribute merger proceeds to management. The current article highlights an overlooked distinction between pre-merger golden parachutes and merger side-payments. Similar to a legislative rider attached to a popular …
Carrots And Sticks: How Vcs Induce Entrepreneurial Teams To Sell Startups, Brian J. Broughman, Jesse M. Fried
Carrots And Sticks: How Vcs Induce Entrepreneurial Teams To Sell Startups, Brian J. Broughman, Jesse M. Fried
Articles by Maurer Faculty
Venture capitalists (VCs) usually exit their investments in a startup via a trade sale. But the entrepreneurial team – the startup’s founder, other executives, and common shareholders – may resist a trade sale. Such resistance is likely to be particularly intense when the sale price is low relative to VCs’ liquidation preferences. Using a hand-collected dataset of Silicon Valley firms, we investigate how VCs overcome such resistance. We find, in our sample, that VCs give bribes (carrots) to the entrepreneurial team in 45% of trade sales; in these sales, carrots total an average of 9% of deal value. The overt …
Independent Directors And Shared Board Control In Venture Finance, Brian J. Broughman
Independent Directors And Shared Board Control In Venture Finance, Brian J. Broughman
Articles by Maurer Faculty
In most VC-backed firms neither the entrepreneurs nor the VC investors control the board. Instead control is typically shared with a mutually appointed independent director holding the tie-breaking seat. Contract theory, which treats control as an indivisible right held by one party, does not have a good explanation for this practice. Using a bargaining game similar to final offer arbitration, I show that an independent director as tie-breaker can reduce holdup by moderating each party’s ex post threat position, potentially expanding the range of firms which receive external financing. This project contributes to the literature on incomplete contracting and holdup, …
Who Should Pay The Corporate Tax In A Flat Tax World?, Rebecca S. Rudnick
Who Should Pay The Corporate Tax In A Flat Tax World?, Rebecca S. Rudnick
Articles by Maurer Faculty
This article reviews the corporate tax system within the context of the historical bias and current effects of the current system of taxation of corporations and shareholders. Drawing on public finance theory, financial markets microstructure research, and perspectives on corporate governance, Professor Rudnick proposes a profits tax on the liquid equity of firms. She finds this to be a normative rationale for a double tax system under optimal tax principles due to the inelasticity of demand for and supply of liquidity and the economic rent it produces. The value of liquidity in different capital markets is the crucial determinate. Under …