We propose that an active takeover market provides incentives by offering acquisition opportunities to successful managers. This allows firms to reduce performance-based compensation and can rationalize loss-making acquisitions. At the same time, takeovers remain a substitute for board dismissal...

Mutual funds are significant blockholders in many corporations. Concerns that funds vote in a pro management manner to garner lucrative pensions contracts led the SEC to mandate the disclosure of proxy votes. We present a model of mutual fund voting in the presence of potential business ties. We...