Please see attached word document for instructions ** Only use word document attached to complete **

Your name: John Smith
Date: May 18, 2021

Directions: Your final project has two parts. For Part 1 of the project, you will expand on the Wikipedia article that you
selected. For Part 2 of the project, you will reflect on what you have learned during this class. Follow the instructions
below to complete the template, then save it to your computer with a new file name. Remember to upload the
completed template to Folio and then upload it to Waypoint for grading. Include your Folio link in the comments box
when you upload this completed template to Waypoint. If you’re new to Folio or need a refresher, check out the Setting
Up and Using Folio guide.

Part 1: Wikipedia Stub Article Expansion
1. State the title of the Wikipedia stub article you are expanding.

Google Forms

2. Write the title for the first subtopic and explain your subtopic in 1 to 2 paragraphs. Use at least one scholarly or one
popular source to support your information; include an APA-formatted in-text citation. Tip: For help with incorporating
sources, review the I.C.E. method in Section 5.3 of your textbook.

Title of subtopic 1 Teaching with Google Forms

Explain your subtopic in 1 to 2
paragraphs

Due to schools being closed for months during the COVID-19
pandemic, Google Forms have been leveraged by teachers as a virtual
collaborative tool to stay connected with their students. Almeida et al. (2021),
who conducted a study about the use of Google Forms in the education
process, states that a tool like Google Forms does not take the place of the
teacher in the classroom, but can be used as innovative tools to foster more
independent learning. This has become increasingly important since children
were forced to learn in the isolation of their homes when schools were in
lockdown. These students were forced to take more responsibility of their
learning since the teacher was not physically present to provide hands-on
guidance. However, with Google Forms, they can stay virtually connected.

Using a tool like Google Forms, the teacher and students do not have
to be in the same physical space to engage in teaching and learning. The
teacher could use Google Forms to publish a study schedule which links to
learning activities; students could then access these activities at their own
pace and practice more independent learning (Almeida et al., 2021). Google
Forms can also be used to create quizzes, which can make grading more
efficient, noted tech journalist, Luke Edwards (2020). Using a tool like
Google Forms to teach can make it easier for students and teachers to stay
connected. All they need is Internet access to share information; the teacher
can assign tasks and track student activity, and the students can complete and
submit their work.

Start with a topic sentence that outlines what your
paragraph will be about.

Each time you incorporate
a source, remember to

I.C.E.

Introduce your source.
Provide context to show

how the source is relevant
to the topic.

Cite your source through
direct quotation or by

paraphrasing. Include the
author’s or authors’ last

names and date of
publication. For direct
quotations, include the

page number.

Week 5: Wikipedia Stub Article Expansion Model

3. Write the title for the second subtopic and explain your subtopic in 1 to 2 paragraphs. Use at least one scholarly or
one popular source to support your information; include an APA-formatted in-text citation. Tip: For help with
incorporating sources, review the I.C.E. method in Section 5.3 of your textbook.

Title of subtopic 2 Using Google Forms to Create Quizzes

Explain your subtopic in 1 to 2
paragraphs

Google Forms is an effective tool for creating online quizzes. As a
cloud-based tool, teachers can easily share links to the quizzes with students
and with other teachers for collaboration (Edwards, 2020). This creates
efficiency and convenience as the teacher does not need to be physically
present to administer an assessment or collaborate with peers. To use Google
Forms, the teacher would need to create an account; the accounts are free so
there is no concern about having to pay costly fees. With an account, teachers
can access Google Forms via Google Drive. There are options to create
quizzes from scratch or choose from numerous templates. Teachers also have
quiz style options such as multiple choice, short answer, paragraphs
(Edwards, 2020). Having numerous options is good for adding variety to the
assessment.

Another efficient feature is that teachers can change the settings of
their quizzes. They can create a setting so students cannot skip questions.
Teachers can also control how students navigate through the quizzes by
locking the quiz. According to Edward (2020), “Once they begin, the window
will go to full screen mode and they won’t be able to navigate away” (para.
15). This feature is useful if teachers want to minimize distractions and help
students focus on the task at hand. Google Forms offers even more features,
all designed to make quizzes more dynamic, engaging, and efficient for
teachers to administer.

4. Provide APA-formatted references for your scholarly and popular sources. Tip: For help, use A Reference Guide to APA
7th Edition.

Almeida, A., Nunes, L.F., & Silva, V.T. da. (2021). Education in times of social isolation: Teaching via
Google Meet and Google Forms. Pesquisa e Ensino, 2(2), 1-29. https://doi.org/10.37853/202127

Edwards, L. (2020). What is Google Forms and how can it be used by teachers? Tech & Learning.
https://www.techlearning.com/how-to/what-is-google-forms-and-how-can-it-be-used-by-teachers

Explain the significance of
the quote. Tie the

evidence back to the point
you are making.

Review your feedback on your previous assignments to ensure that your
sources include 1 scholarly source and 1 popular source.

Part 2: Written Reflection
During this class, you have developed valuable information literacy skills and knowledge that you have applied to
contribute to the development of an article. In this section, you will reflect on those skills and knowledge by completing
the two sections below.

a. Describe when it would be appropriate to use a scholarly source and when it would be appropriate to use a popular
source. Your response should be 1 to 2 paragraphs.

b. Reflecting on the live library session you attended, discuss (1) how you utilized what you learned to complete this
assignment, and (2) how you will use what you learned in your future courses, job, and everyday life. Your response should
be 1 to 2 paragraphs.

For help with this question, review your work in the Week 2 Discussion 1, where you
discussed popular vs scholarly sources. Use specific details and examples to illustrate your

points fully, and remember that a fully-developed paragraph is 5 to 7 sentences.

To complete this question, consider what information was covered in the live library session
that you attended. If you were unable to attend the live session, reflect on the recording that

you watched. Remember that a fully-developed paragraph is 5 to 7 sentences.

JOURNAL OF FINANCIAL AND QUANTITATIVE ANALYSIS Vol. 48, No. 6, Dec. 2013, pp. 1717–1753
COPYRIGHT 2013, MICHAEL G. FOSTER SCHOOL OF BUSINESS, UNIVERSITY OF WASHINGTON, SEATTLE, WA 98195
doi:10.1017/S002210901300063X

On the Importance of Golden Parachutes

Eliezer M. Fich, Anh L. Tran, and Ralph A. Walkling∗

Abstract

In acquisitions, target chief executive officers (CEOs) face a moral hazard: Any personal
gain from the deal could be offset by the loss of the future compensation stream associated
with their jobs. Larger, more important parachutes provide greater relief for these losses.
To explicitly measure the moral hazard target CEOs face, we standardize the parachute
payment by the expected value of their acquisition-induced lost compensation. We examine
851 acquisitions from 1999–2007, finding that more important parachutes benefit target
shareholders through higher completion probabilities. Conversely, as parachute importance
increases, target shareholders receive lower takeover premia, while acquirer shareholders
capture additional rents from target shareholders.

I. Introduction

Companies receiving federal aid are going to have to disclose publicly
all the perks and luxuries bestowed upon senior executives, and provide
an explanation to the taxpayers and to shareholders as to why these ex-
penses are justified. And we’re putting a stop to these kinds of massive
severance packages we’ve all read about with disgust; we’re taking the
air out of golden parachutes.

—President Barack Obama (Feb. 4, 2009)1

∗Fich, [email protected], Walkling, [email protected], LeBow College of Business, 3141 Chestnut
St, Philadelphia, PA 19104; and Tran, [email protected], Cass Business School, City University
London, 106 Bunhill Row, London EC1Y 8TZ, United Kingdom. For very helpful comments, we
thank Alberto Banal, Leonce Bargeron, Roland Battie, Jie Cai, Naveen Daniel, David Denis, Diane
Denis, Bill Greene, Raj Gupta, Shane Heitzman, Richard Jaffe, Kathy Kahle, Paul Malatesta (the
editor), Harold Mulherin, Lalitha Naveen, Micah Officer, Matthew Rhodes-Kropf, Javier Suarez, and
David Yermack; members of the Advisory Board of Drexel’s Center for Corporate Governance; sem-
inar attendees at the Cass Business School, Drexel University, Erasmus University, Fordham Univer-
sity, IESEG School of Management, Syracuse University, State University of New York Binghamton,
University of South Florida, and Vlerick Leuven Gent Management School; and session participants
at the 2009 Finance Forum held at Instituto de Estudios Superiores de la Empresa (IESE), the 2009
University of Southern California Law School Conference on Empirical Legal Studies, the University
of Oregon 2010 Research Conference honoring the scholarly contributions of Larry Dann, and the
2011 meetings of the Klynveld Peat Marwick Goerdeler (KPMG) PhD Project. We also appreciate
the constructive comments and insightful reviews provided by an anonymous referee. Fich gratefully
acknowledges financial support from the Center for Research Excellence at the LeBow College of
Business. All errors are our responsibility.

1The full speech by President Obama can be viewed at http://www.whitehouse.gov/blog post/
new rules/

1717

1718 Journal of Financial and Quantitative Analysis

Golden parachutes are more controversial today than when they first ap-
peared over 20 years ago. Advocates argue that parachutes are a necessary part of
a competitive pay package required to attract and retain talented executives. It is
also argued that parachutes are beneficial to shareholders, since they induce senior
managers to “do the right thing” in the event of an acquisition attempt. Opponents
object to parachutes because they are linked to a change in control of a com-
pany, not to its continuing or past performance. Detractors portray parachutes as
guaranteeing managers “pay for failure,” regardless of shareholder returns. Head-
lines from the popular press regularly criticize golden parachutes and express
widespread concern about managerial excess and the lack of pay for performance
related to parachute payments.

Government actions with regard to parachutes mirror the controversy. On
Jan. 25, 2011, by a 3-2 vote, the Securities and Exchange Commission (SEC)
approved an amendment that adds Section 14A to the Securities Exchange Act
of 1934, bowing to pressure from institutional investors and other corporate gov-
ernance activist groups. Under this amendment, companies soliciting votes to
approve a merger, acquisition, or similar business combination need to disclose
golden parachute compensation arrangements. The new law also requires these
firms to conduct a separate shareholder advisory vote to approve golden parachute
compensation.2

The preceding discussion suggests that the controversy surrounding golden
parachutes is alive and well. At the heart of the controversy over parachutes is a
moral hazard problem: Target chief executive officers (CEOs) have direct influ-
ence over actions that provide personal benefit or loss at the possible expense of
their shareholders. To address the moral hazard issue in a modern sample of firms,
we study 851 acquisition offers during 1999–2007 to learn whether parachutes
benefit the executives receiving them, the shareholders in the firms that grant
them, or both. From an academic perspective, these issues are similar to classic
themes in the literature: incentive alignment and managerial interest.3

Academic research has greatly enhanced our knowledge of parachutes, but to
date, empirical analyses have not explicitly modeled the financial trade-off meet-
ing target CEOs. The moral hazard problem is best captured by recognizing the
relative takeover-related gains and losses experienced by the person (arguably)
most responsible for the completion and terms of a merger: the target CEO. Con-
sequently, we re-examine existing hypotheses on a recent sample of acquisitions
using a measure of parachute importance that mirrors the moral hazard the target
CEO encounters. It scales the parachute payment by the expected pay loss this
CEO incurs if the merger is completed.

Our tests reveal that a 1-standard-deviation increase in parachute impor-
tance is associated with an increase of 6.9 percentage points in deal completion.
Our tests also indicate that parachute provisions affect the wealth of target CEOs

2The new rules affect Section 14d-10(a)(2) of the 1934 Securities Act, which provides a safe
harbor enabling the compensation committee of a target’s board of directors to grant golden parachutes
or other benefits to its executives during a tender offer negotiation. The SEC approved the safe harbor
provision on Oct. 18, 2006.

3Incentive alignment and managerial interest are hypotheses often studied in settings prone to
agency problems (see, e.g., Jensen and Meckling (1976)).

Fich, Tran, and Walkling 1719

and target shareholders in a nontrivial manner. On average, target CEOs cash
in about $4.9 million from parachutes when their firms are sold. Conversely,
a 1-standard-deviation increase in parachute importance is associated with a drop
in premia of about 2.6 percentage points. This shortfall implies a reduction of
$127 million in deal value for the average transaction in our sample.

Given the effect of parachutes on both merger completion probabilities and
takeover premia, we examine whether it makes sense for target CEOs to accept
a lower premium (even with a larger parachute) because the value of their target-
equity-based portfolio (which depends on the takeover premium) will decline.
Similarly, is it logical for shareholders to provide a parachute to their CEO if this
benefit might make them worse off in case of a merger?

To address rationality concerns related to target shareholders, we follow the
method in Comment and Schwert (1995) and estimate an unconditional premium
regression. We find that the unconditional premium is a positive function of the
presence of a golden parachute. This result indicates that including a parachute
provision in the CEO’s compensation contract is associated with a net gain to
shareholders. This finding is significant not only because it shows that it is indeed
rational for shareholders to provide a parachute to their CEOs but also because
it suggests that what really matters (during mergers) is the parachute’s relative
importance, not its mere presence.

In our sample, the unconditional probability of deal completion is 87.8%
and the mean takeover premium offered is around 35.9%. As noted previously,
a 1-standard-deviation increase in parachute importance raises the probability of
merger completion by 6.9 percentage points but lowers the takeover premium
by 2.6 percentage points. These estimates imply that the expected appreciation
accruing to the target CEO’s equity-based portfolio is the same (at 31.5%) with
or without such an increase in parachute importance. Given this evidence, the ac-
tions of target CEOs who get more important parachutes appear perfectly rational.
Interestingly, these results also imply that the expected premium to target share-
holders is essentially the same even with an increase in parachute importance.
This raises the possibility that target shareholders are not really hurt by more
important parachutes. In fact, risk-averse shareholders might prefer the same ex-
pected payoff with less risk (higher probability of deal completion). In a similar
fashion, a certainty equivalent argument can explain the actions of target CEOs
in settling for certain lower premia (and the consequent triggering of their merger
pay package) rather than bargaining for higher premia at a possible risk to deal
completion. That is, the negotiated premium represents the target CEO’s own
reservation premium, which provides this executive with a certainty equivalent of
his or her lost compensation.

We also analyze the investor reactions to the acquisition announcement of
the publicly traded bidders in our sample. These tests reveal that as the impor-
tance of the parachute to target CEOs increases, bidding firms earn higher merger
announcement returns. This finding indicates that deals in which the target CEO
gets a relatively more important parachute exhibit a wealth transfer from share-
holders of the target to shareholders of the buyer.

We identify a number of empirical issues that could raise concerns related
to endogeneity or to other econometric biases. First, parachutes are endogenously

1720 Journal of Financial and Quantitative Analysis

chosen, which introduces the potential of self-selection bias. Second, since firms
do not randomly become takeover targets, our analyses might be vulnerable to
sample selection bias. Third, because industry and/or time trends could affect the
incidence of mergers and the way executive pay is structured, our tests might
be prone to an omitted variables bias. Fourth, since parachutes are common pro-
visions in many compensation contracts, their effects might be anticipated and
impounded in a target’s price. Accordingly, our analysis could be susceptible to
anticipation bias. Fifth, foreknowledge of the premium a potential target could
command in the event of a takeover might dictate how that firm structures a
merger-related parachute for its CEO. Under this scenario, the direction of causal-
ity would be reversed.

To address the issues described above, we use different empirical specifica-
tions and econometric methods. Our multivariate tests control for self-selection
endogeneity with the Heckman (1979) approach. We use the same procedure to
address sample selection issues by controlling for the probability that a firm be-
comes a takeover target. Also, to account for anticipation bias, we employ the
multistage process in Comment and Schwert (1995) and divide parachutes into
predictable and surprise components. To control for an omitted variables bias,
our multivariate tests include year and industry fixed effects. To consider reverse
causality concerns, we estimate several two-stage instrumental variable systems.
The inverse association between parachute importance and premia remains under
the different empirical specifications and econometric techniques we employ. In
addition, our results are robust to alternative parachute proxies, including a mea-
sure of parachute importance that scales its value by the value of the merger pay
package received by the target CEO.

Aside from the econometrics issues noted above, it is possible that the results
herein obtain because the bargaining power of targets offering more important
parachutes is low and not because their CEOs give away rents. To assuage such
concern, we add controls that potentially capture the target’s bargaining power.
Rhodes-Kropf and Kadyrzhanova (2011) argue that characteristics (such as the
level of industry concentration) that allow managers to delay takeovers have a
significant bargaining effect. Consequently, our Heckman (1979) selection equa-
tion of the probability of becoming a target controls for the Herfindahl-Hirschman
index to proxy for the firm’s power in its own industry. Additionally, our mul-
tivariate tests control for target-initiated deals because the results in Aktas, de
Bodt, and Roll (2010) suggest that this variable is a reasonable proxy for the tar-
get’s bargaining power. Our regressions also include input-output/sales-purchases
(independent) variables between the target and the acquirer industries similar to
those in Ahern (2012). He argues that these customer-supplier variables capture
the market power of the parties to an acquisition and, therefore, help account for
the role of product markets on bargaining outcomes in mergers. Our results are
robust to these different controls for bargaining power.

Our work provides a better understanding of the wealth effects and incentives
of merger-related exit pay to target CEOs. This evidence is relevant in the ongo-
ing policy debate regarding best practices in corporate governance. Our results are
consistent with the following interpretation: As the importance of the parachute
to target CEOs increases, they negotiate an offer up to their own reservation

Fich, Tran, and Walkling 1721

premium, which provides them with a certainty equivalent that is proportional
to their expected lost compensation. At the same time, acquirers experience higher
returns, which might be a manifestation of the lower premium. Therefore, condi-
tional on receiving a bid, i) target CEOs are partially made whole for their per-
sonal losses, ii) target shareholders are worse off, and iii) bidder shareholders are
better off. This evidence appears consistent with the managerial interest hypoth-
esis of golden parachutes. Nonetheless, this interpretation of our findings ignores
the fact that parachutes also increase the probability of receiving and complet-
ing a bid and, thus, increase the welfare of target shareholders. Once this factor
is considered, it is possible that target shareholders are better off (they obtain a
completed bid they would not have otherwise received), and bidder sharehold-
ers are also better off because they get a good deal conditional on making a bid.
Under this interpretation of our findings, more important parachutes align the
incentives of target shareholders and target CEOs: These executives achieve their
own interests while still completing advantageous deals for their shareholders.

This paper contributes to the literature as follows: First, we provide an up-
dated analysis on an unresolved topic. To our knowledge, even recent published
papers on parachutes (Hartzell, Ofek, and Yermack (2004), Bange and Mazzeo
(2004)) use samples ending in 1997 and 1990, respectively. Because the last
10–15 years have arguably witnessed the most dramatic changes in corporate gov-
ernance in history, analyzing parachutes in the current decade is important.4 As
the president’s recent comments indicate, golden parachutes remain a controver-
sial tool of corporate governance.

Second, we develop a new measure of the importance of parachutes. It re-
flects the moral hazard issue faced by target CEOs, generally the single most im-
portant executive in merger negotiations. Our measure, which scales the parachute
payment by the expected pay loss this CEO incurs if the merger is completed, is
unlike those in the extant literature. Indeed, existing studies in this literature either
control for the presence of a parachute or assess the increased acquisition costs
related to the parachute. However, none measures the importance of the parachute
to the target CEO.5 We show that the certainty equivalent of the lost compen-
sation to target CEOs is proportional to the expected value of that compensa-
tion. This result indicates that our measure of parachute importance is unique in
that it captures the incentives CEOs face when their firms become acquisition
targets.

Third, existing studies focus on the impact parachutes have on the perfor-
mance of the firms granting these benefits. We advance this literature by also
examining the potential effect of the parachute given to the target CEO on the
return to shareholders in the acquiring firm.

4Cheffins (2009) chronicles numerous governance regulatory changes occurring in the United
States during 1990–2007.

5Among published papers in the literature studying parachutes, Knoeber (1986), Denis and
Serrano (1996), Cotter, Shivdasani, and Zenner (1997), Evans, Noe, and Thornton (1997), Agrawal
and Knoeber (1998), Hartzell et al. (2004), and Bange and Mazzeo (2004) use dummy variables to
capture the presence of a parachute. Others studies like Lambert and Larcker (1985), Machlin, Choe,
and Miles (1993), and Lefanowicz, Robinson, and Smith (2000) divide the value of the parachute by
the target’s market value of equity.

1722 Journal of Financial and Quantitative Analysis

Fourth, our empirical evidence supports the theoretical prediction in Ross
(2004) that the overall structure of a pay schedule (even one markedly convex)
could result in more (instead of less) risk aversion. Ross argues that attitudes
toward risk depend not only on the convexity of an agent’s compensation sched-
ule, but also on how the overall schedule maps into more (or less) risk-averse
regions of the agent’s utility function to the extent it can undo the impact of con-
vex (or concave) pay schedules. Our findings suggest that the relative importance
of the parachute curtails the convexity that equity-based pay imposes upon the tar-
get CEO’s utility function. Importantly, under this interpretation, our results offer
a plausible answer to a paradox in the literature showing that target CEOs often
accept lower premia in exchange for benefits (like unscheduled option grants
(Fich, Cai, and Tran (2011)), augmented parachutes or bonuses (Hartzell et al.
(2004)), or jobs in the merged firm (Wulf (2004))) that are unlikely to fully cover
their merger-related personal losses.

The paper proceeds as follows: Section II describes our data. Section III
contains our empirical analyses. Section IV addresses a number of robustness
issues. Section V concludes.

II. Data and Sample Characteristics

We begin with a base sample of 4,381 mergers and acquisitions (M&A) an-
nounced during 1999–2007 and tracked in the Securities Data Company’s (SDC)
M&A database. We require the target to be a publicly traded U.S. firm and
exclude spinoffs, recapitalizations, exchange offers, repurchases, self-tenders, pri-
vatizations, acquisitions of remaining interest, partial interests or assets, and trans-
actions in which deal value is less than $1 million. From this group, we keep
3,521 deals in which targets have stock return and accounting data available from
the Center for Research in Security Prices (CRSP) and Compustat, respectively.
We lose 278 deals because premium data are missing from SDC and from other
sources such as CRSP, LexisNexis, or Factiva. After filtering out deals in which
governance data for targets are not available from RiskMetrics, our final sample
consists of 851 offers.

A. Target and Deal Characteristics

We read the S-4, DEFM14A, SC-TO, and DEF14A proxies filed with the
SEC by the target and/or acquiring firm. From these proxies, we obtain informa-
tion on the sale procedure, the party that initiates the deal, and the date merger
negotiations begin. Panel A of Table 1 reports the offer characteristics in our sam-
ple. Among the 851 transactions, about 18% are tender offers and 7% are hostile
takeovers. These statistics compare favorably to those in Officer (2003). His sam-
ple of acquisitions during 1988–2000 consists of about 20% tender offers and 8%
hostile deals. Similar to Moeller, Schlingemann, and Stulz (2005), almost 55% of
the transactions in our sample are paid in cash. The deals we study have a com-
pletion rate close to 88%, which is comparable to that of Officer, who reports a
completion rate of 83%. We follow the procedure in Boone and Mulherin (2007)
to identify the start of merger negotiations and the party responsible for initiating

Fich, Tran, and Walkling 1723

the deal. We find that in over 39% of all deals the target firm initiates the sale.
Aktas et al. (2010) find that in about 42% of the cases they study, target firms
initiate the merger. Grinstein and Hribar (2004) report a mean deal value of $4.7
billion for the transactions they examine, which is similar to the $4.76 billion
mean value in our sample.

Panel B of Table 1 contains key financial characteristics for the target firms
in our sample. The average (median) market value of equity is $3.302 billion
($0.991 billion), and leverage accounts for 26% (25%) of total assets. These

TABLE 1

Sample Description

Table 1 describes our sample, which consists of 851 mergers and acquisitions announced during 1999–2007 and tracked
in the Securities Data Company’s (SDC) merger and acquisition database in which the target is a publicly traded U.S.
company and the deal value is at least $1 million. For selecting the sample, we require that target firms have stock return,
accounting, and governance data available from the Center for Research in Security Prices (CRSP), Compustat, and
RiskMetrics (formerly the Investor Responsibility Research Center) database, respectively. In Panel A, deal status, mode
of acquisition, method of payment, and deal attitude are obtained from SDC. As in Officer (2003), we classify a deal as
a hostile takeover if the bid is recorded by SDC as “hostile” or “unsolicited.” Information on sale procedure and initiator
is obtained from reading the merger background filed with the SEC. As in Boone and Mulherin (2007), auction refers to
cases in which the selling firm contacts multiple potential buyers while negotiation focuses on a single buyer. Initiator is the
party that first contacts the other party in the sale process. A deal is in the same industry if both the target and the acquirer
belong to the same Fama and French (1997) 48-industry classification. In Panel B, all financial variables are measured
at the end of the fiscal year before the merger announcement date. Market-to-book is market value of equity divided by
book value of equity. Leverage equals the book value of debt divided by market value of assets. Deal value is obtained
from SDC. In Panel C, ownership is the percentage of stock and options owned by the CEO. Market value of ownership is
measured as of 20 trading days before the announcement date. In Panel D, compensation data are as of the end of the
fiscal year before the announcement date. Estimated lost compensation is the estimated present value of the CEO’s lost
compensation when his/her firm is sold as in Fich et al. (2011). We obtain information on the golden parachute payment
from the last proxy filed by the targets prior to the merger announcement, the S-4 proxy filed by the acquirers, and/or the
DEFM14A proxy filed by the targets following the merger announcement.

Mean Median

Panel A. Deal Characteristics

Completion (0, 1) 0.878
Tender offer (0, 1) 0.182
Stock payment (0, 1) 0.162
Cash payment (0, 1) 0.549
Hostile takeover (0, 1) 0.069
Auction (0, 1) 0.337
Target-initiated deal (0, 1) 0.393
Same industry (0, 1) 0.561
Deal value ($ billion) 4.758 1.544

Panel B. Target Characteristics

Market value ($ billion) 3.302 0.991
Market-to-book 1.734 1.422
Leverage 0.260 0.248

Panel C. Target CEO Characteristics

Chairman (0, 1) 0.570
Founder (0, 1) 0.128
Compensation committee member (0, 1) 0.013
Age (years) 54.390 55.000
Tenure (years) 7.165 4.786
Ownership (%) 4.632 1.836
Market value of ownership ($ million) 96.079 22.728

First Third
Mean Quartile Median Quartile

Panel D. Target CEO Compensation and Golden Parachute Characteristics

Salary and bonus ($ million) 1.662 0.636 0.940 1.525
Total compensation ($ million) 5.366 1.170 2.615 5.022
Parachute (0, 1) 0.864
Parachute multiple 2.225 2.000 2.999 3.000
Parachute value ($ million) 4.873 1.482 2.553 4.573
Lost compensation ($ million) 39.896 7.501 16.387 36.524

1724 Journal of Financial and Quantitative Analysis

statistics are comparable to those of Boone and Mulherin (2007), who report a
mean market capitalization of $2.7 billion, and Bates and Lemmon (2003), who
report an average leverage of 23.3%. Targets in our sample have a median market-
to-book ratio of 1.42, which is close to the median ratio of 1.69 reported by Officer
(2003) for the same variable.

B. Target CEO Characteristics

In Panel C of Table 1, we report the target CEO’s characteristics. On
average, 57% of all CEOs also chair their boards and almost 13% are their firm’s
founders. The average (median) CEO is 54 (55) years old, owns 4.6% (1.8%) of
the firm’s common equity, and has been the chief executive for about 7 (5) years.
These characteristics concur with those in Hartzell et al. (2004), who report the
following CEO statistics: mean age of 54, average equity ownership of 3.6%, and
median tenure of 5 years.

We collect compensation data from proxy statements filed by each target
with the SEC. In some instances, we supplement these data with information in
the ExecuComp database. Key compensation characteristics for target CEOs in
our sample appear in Panel D of Table 1. Bebchuk and Grinstein (2005) report
an average of $5.01 million in total CEO compensation.6 During the last year in
office prior to the deal, the average CEO in our sample earns about $5.4 million
in annual total pay.

C. Lost Compensation

CEOs who sell their firms forfeit the compensation they would earn if they
were to remain in office. We follow the methodology and assumptions in Yermack
(2004) and in Fich et al. (2011) to calculate the expected lost compensation for
the target CEOs in our sample. First, we use information on their current com-
pensation, their restricted stock, and their option holdings as reported in proxy
statements before the merger announcement. Second, we assume that all CEOs
retire by age 65 and that CEOs who are at least 65 years old expect to stay in
office 1 more year before retiring. Third, we assume that the probability of depar-
ture increases by 4% each year due to acquisitions, delistings, or other turnover
reasons. Fourth, we assume that salary and bonus increase by 2% from that re-
ceived during the year prior to the acquisition when firm performance is above
the Fama and French (1997) median industry return on assets. Fifth, we assume
that the probability of departure increases by an additional 2% if the company
performs below the industry median. Finally, we use a real rate of 3% to discount
cash flows. Fich and Shivdasani (2007) estimate that the present value of lost in-
come for CEOs expected to remain in office for another 7 years is $45.5 million.
On average, the present value of the expected lost compensation for target CEOs
in our sample is close to $40 million. Given our estimates, it appears that

6Specifically, they report an average total compensation of $9.41 million for CEOs of Standard &
Poor’s (S&P) 500 firms, $3.94 million for CEOs of MidCap 400 firms, and $2.05 million for CEOs of
SmallCap 600 firms during 1993–2003.

Fich, Tran, and Walkling 1725

employment termination due to a takeover triggers nontrivial wealth losses for
target CEOs.

D. Parachute Provisions for Target CEOs

Many boards of directors provide parachutes to their CEOs. We obtain in-
formation on these provisions from the last proxy filed by the targets prior to the
merger announcement, the S-4 proxy filed by the acquirers, and/or the DEFM14A
proxy filed by the targets following the merger announcement. Among the 851
targets, 735 (or about 86%) have a golden parachute in place for their CEOs be-
fore merger negotiations begin. From the target CEO’s employment agreement,
we are able to estimate the size of the parachute. Specifically, when a parachute
is provided, the employment agreement often stipulates that the parachute pay-
ment is based on a multiple of the executive’s regular cash compensation. Panel D
of Table 1 shows that the mean (median) parachute payment is $4.87 million
($2.55 million).7

Section 280G of the Internal Revenue Code states, “If the present value of
a change-in-control payment (golden parachute) exceeds the safe harbor (three
times the average taxable compensation over the 5 most recent calendar years
preceding the change-in-control, less $1), the company loses tax deductions for
these excess amounts. Additionally, the executive is required to pay a 20% excise
tax on the excess payment.” Given this tax rule, it would be reasonable to assume
that …

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5.3 How Do I Maintain Academic Integrity While Incorporating Research?

Your Road Map to Success: Section 5.3

Learning Outcome 5.3: Demonstrate an understanding of how copyright law and the concepts of public
domain, fair use, and open access are all foundational to appropriate citation when quoting,
paraphrasing, and summarizing information.

Why is this important?

Having an understanding of copyright law and intellectual property can keep you out of legal
trouble online and in school, as well as prevent other people from stealing your ideas and work.
For example, Yolanda has been blogging about her family life ever since she had her first child.
Since the blog has been gaining in popularity, she realizes she needs to be more careful about
the images she posts. Although it is legal for her to post the family pictures she takes, she needs
to consider who else might be using them and in what context. She also realizes she shouldn’t
be using images from other websites without first getting permission from the owners—just as
she wouldn’t want her family photos to be used on other websites without her knowledge.

How does this relate to your success in this course?

Mastering this learning outcome will help you maintain your academic integrity and avoid
violating your school’s policies on academic dishonesty.

Chapter 1 briefly introduced the ACRL threshold concept information has value. Information can be considered
a commodity, a method of education, a way to influence, and a means of understanding the world around you.
Let’s take a closer look at how information can be considered a commodity.

The monetary value we place on certain types of information designates them as a commodity. Think of how
much money you spend on the purchase of books, movies, magazines, newspapers, and cable subscriptions, not
to mention Internet access. Society recognizes the amount of time, thought, and resources that go into the
creation of information and places a monetary value on this process. Now think about the information you
consume online. Much of it seems free to access; however, the hidden cost of doing so includes your exposure to
advertising and the access you provide to your personal information, such as your browsing habits, which we
discussed in Chapter 3. It’s clear, then, that all information has value. Students who are developing their abilities
in the information has value threshold concept

respect the intellectual work of others by crediting the source of original ideas through proper attribution
and citation;
understand that intellectual property is a legal and social construct that varies by culture;
articulate the purpose and distinguishing characteristics of copyright, fair use, open access, and public
domain;
understand how the commercial use of their personal information and online interactions affects the
information they receive and the information they produce or disseminate online; and

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Copyright Rules and Exceptions

Critical-Thinking Questions
1. List three things you cannot do under copyright law.
2. What are some exceptions to copyright rules?

make informed choices regarding their online actions in full awareness of issues related to privacy and
the commercial use of personal information.

Copyright, Public Domain, Fair Use, and Open Access

The concept of intellectual property helps
ensure that society respects the value of
original creations. According to the World
Intellectual Property Organization (n.d.),
intellectual property “refers to creations
of the mind, such as inventions; literary
and artistic works; designs; and symbols,
names and images used in commerce”
(para. 1). Work that is considered an
author’s intellectual property is covered
by copyright, a patent, or trademark. Each
of these ensures that creators are able to
earn recognition for their valuable
innovations and contributions to society.
The exact laws associated with
intellectual property vary from country to
country. Let’s take a closer look at
copyright.

Copyright
Living in the digital age offers new
challenges when it comes to the access
and use of information, particularly the
ease with which information can be
copied and shared in ways that disregard
its value. This is where copyright comes
in. Copyright is a series of laws and guidelines set forth by a country to protect the original works of an author.
It essentially provides that the author of a work is the sole owner of the right to publish or otherwise reproduce
that work. Copyright applies to the following (note that this list is not exhaustive):

text (for example, in books, journal articles, reports, webpages)
images (for example, photographs, artistic works, graphs)
video and moving images (for example, films, videos, television commercials)
audio recordings (for example, music recordings, radio programs, podcasts)
computer programs
pictorial, graphic, or sculpted works
architectural works

It makes no difference whether these materials are unpublished, self-published, published by a traditional
publisher, or published online. Once they are created in a fixed form, they are all covered by copyright, whether
or not the author has registered the work with the U.S. Copyright Office. However, authors often grant their
publisher the right to reproduce their work as part of their publishing contract.

Copyright Rules
and Exceptions

From Title:

Introduction to Information Literacy
(https://fod.infobase.com/PortalPlaylists.aspx?
wID=100753&xtid=116779)

 0:000:00 / 1:45 / 1:45 1x1x

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Given the definition of intellectual property, you might think that copyright law covers everything produced.
However, quite a bit of information does not qualify for copyright protection. Here is some information not
covered by copyright:

facts
ideas, concepts, and principles
noncreative works (phone books, URLs, maps, computer algorithms, and so on)
the listed ingredients and basic steps in individual recipes
works not created in a tangible form

When using a work for academic purposes, such as a research paper, you will typically not need to request
permission. When in doubt, however, it’s best to request permission from the author or copyright holder first.
The following sections cover options that fall outside the guidelines of copyright law. They are public domain,
fair use, and open access.

Public Domain

Works that have never been or are no longer covered by copyright law belong in the public domain. Permission
is not needed to use materials in the public domain. However, you must still cite the material appropriately
according to the reference format required for your paper or project. This helps ensure that your audience can
track the source for your information for themselves. Works that are in the public domain include works that
were first published as follows:

before 1925
from 1925 to 1977 without a copyright notice placed on copies of the work
from 1925 to 1963 with a copyright notice, but the copyright was not renewed
from 1978 to March 1, 1989, without a copyright notice and without copyright registration within the
first 5 years of publication

Fair Use
According to the American Library Association (2013), fair use “allows for the use of copyrighted works for
purposes of criticism, comment, news reporting, scholarship, or research” (para. 2). The goal behind fair use is to
promote creativity for the benefit of society. Although fair use of a work means that you will not need to seek the
author’s permission to use the work, you still need to give credit to the author through a citation.

To determine whether your use of a work qualifies as fair use, consider four criteria: your purpose for using the
work, the nature of the work, how much of the work you want to use, and the effect your use will have on the
market (see Figure 5.9). These four criteria can help you determine whether the material you use for an academic
paper will fall under an educational fair use. As long as you do not use a substantive portion of the work (the law
does not define what precise amount constitutes a substantive portion) and it is factual and/or published, you are
most likely covered under fair use. However, if you took that paper and posted it to a website or blog, your paper
could violate the standards of fair use, in which case you would have infringed on the author’s copyright. Also
keep in mind that only a court can make an actual determination of fair use. However, when you apply the four
fair-use criteria, you are using the same criteria a judge would consider in a court of law. If you need further help
deciding whether your use of a work qualifies as fair use, try consulting this Fair Use Evaluator
(http://librarycopyright.net/resources/fairuse (http://librarycopyright.net/resources/fairuse) ).

Figure 5.9: The fair-use four

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Student Profile: Andy

Andy’s boss tasked him with creating a PowerPoint presentation for an internal company meeting sharing
the products and services offered by the company. Andy decided to enrich the presentation by adding
some images he located on various websites to the slides. Since the presentation was for internal use only,
Andy didn’t bother requesting permission to use the images or cite them. After the presentation, which
was a huge success, Andy posted the PowerPoint to his own website. Not only will this promote his
company, it will also display his creative skills to a wider audience.

Did Andy’s actions violate copyright? Most likely, his use of the images does not constitute fair use,
since the images were unaltered reproductions, are creative works, and are being used commercially.
Also, there’s a good chance that the copyright holder’s business model depends on licensing these
images.

Open Access

Open access is the free and unrestricted access to information on the Internet. In the academic world, open
access specifically refers to the free and unrestricted access to digital scholarly/peer-reviewed journal articles and
research. Open access to these resources helps advance the scholarly conversation by increasing the number of
people within a field or discipline who are able to view recent research and innovation. As discussed in Chapter

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Tero Versalainen/iStock/Getty Images Plus

Online purchases, web searches, and more
can challenge your privacy, since cookies
can track your searches and even personal
information. While you research online,
remember to clear your cookies and
cache, and avoid letting your browser or
computer retain passwords.

2, open access can also encourage the publishing of negative studies and help reduce publication bias. However,
many publishers are against the open-access model. Publishers often hold the copyright of the works their
authors produce and choose to restrict access unless it is purchased. Open access can significantly reduce their
revenue by making previously pricey journal access available for free.

Authors who wish to share their work broadly are therefore exploring alternatives to traditional publishing, such
as open access and Creative Commons (http://creativecommons.org/ (http://creativecommons.org/) ). Creative
Commons is a nonprofit organization that provides modified copyright licenses that allow creators to decide how
the public can use their information. At the same time, academic libraries are seeking to renegotiate their
subscriptions to large databases and journal publishers to include open-access models. Following the lead of
European plans that require open access to academic studies, many universities are pushing back against the
current publishing model that is expensive and restrictive (Ellis, 2019).

Quite a few websites, such as YouTube, Google Images, and Flicker, now allow you to filter your search results
to only those that fall within Creative Commons. You can search these sites on the Creative Commons website.

Privacy Issues

In the digital age, the amount of privacy we can expect as we
consume digital information can vary and is often unclear. Often,
a simple Google search on a person’s name can reveal phone
number, age, address, and a list of possible relatives—not to
mention any Facebook groups the person may belong to or
websites they have posted to. Moreover, certain types of cookies,
known as tracking cookies, can record your browsing habits,
allowing your Internet browser and affiliated advertisers to use
the information to tailor your Internet experience in ways you
may not be aware of. Being information literate means protecting
your private and personal information, along with the
information of others. Fortunately, certain laws and strategies can
help.

Let’s take a quick look at three privacy laws relevant to you.

The Privacy Act of 1974 prevents government agencies
from disclosing your personal information without your
written consent. For more information on this act, check
out the U.S. Department of Justice website
(https://www.justice.gov/opcl/overview-privacy-act-
1974-2015-edition (https://www.justice.gov/opcl/overview-
privacy-act-1974-2015-edition) ).
In 1996 the Health Insurance Portability and
Accountability Act was passed to protect your medical
information. One goal of this act is to make it easier to
protect the confidentiality and security of your health
care information. Check out the U.S. Department of
Health and Human Services website
(https://www.hhs.gov/ocr/privacy/
(https://www.hhs.gov/ocr/privacy/) ) for more information.

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The Family Educational Rights and Privacy Act protects
the privacy of your student education records by
preventing school employees from disclosing your
personal information. It also ensures that your school
records cannot be shared without your consent. For
more information on this law, see the U.S. Department
of Education website
(https://www2.ed.gov/policy/gen/guid/fpco/ferpa/inde
x.html
(https://www2.ed.gov/policy/gen/guid/fpco/ferpa/index.html) ).

Protecting your digital information becomes increasingly important the more you use the Internet. As we
explored in Section 3.3, the Internet browser you use will track your browsing habits, as will third-party
websites. This tracking can result in personalized advertisements that follow you as you browse, as well as
search engine results that are filtered to echo your usual browsing habits or to privilege the search engine’s top
advertisers. Your personal information can also be bought and sold commercially. This access to your
information is often disclosed in the privacy terms that you must agree to when you download any programs or
apps. Because the policies are lengthy and written in legalese, most users agree without reading them.

The following strategies can help protect your privacy.

Clear out your cache and cookies regularly (see Chapter 3).
Consider installing antispyware software on your computer. This software will scan your computer and
detect whether any spyware, virus, or other security risk has gained access to it.
Limit how much of your information companies can share with other companies. For more on limiting
sharing, visit the Federal Trade Commission’s website on privacy
(https://www.consumer.ftc.gov/articles/0222-privacy-choices-your-personal-financial-information
(https://www.consumer.ftc.gov/articles/0222-privacy-choices-your-personal-financial-information) ).

The ICE Method for Crediting Outside Sources

When including outside sources in your writing, follow the ICE method:

I: Introduce

C: Cite

E: Explain

As you’ll see, you’ll use this method when you’re inserting direct quotations as well as when you’re
paraphrasing or summarizing someone else’s ideas.

Introduce the Source
Introduce the source by giving your readers any information that would be useful to know: Who said it? Where
did this idea come from? When was it said? Remember that providing context is important so that your readers
understand why the source is relevant to your work. Here are some examples of how to introduce a source.

In her review of Toyin Ojih Odutola’s art, Zadie Smith (2020) observes . . .

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Natalie Diaz (2020), celebrated poet and member of the Gila River Indian Tribe, contends . . .

In the textbook Introduction to Physical Anthropology, Lynn Kilgore (2017) states . . .

After introducing the quotation, be sure that you use a signal verb to indicate that the source’s words are next. In
the examples here, you can see that “observes,” “contends,” and “states” are used to signal the source’s words.
Common signal verbs include the following.

acknowledges
advises
agrees
analyzes
answers
argues
asserts
assumes
believes
charges
claims
considers
criticizes
declares
describes
disagrees

discusses
explains
emphasizes
expresses
holds
implies
interprets
leaves us with
lists
objects
observes
offers
opposes
points to
presents
proposes

recognizes
regards
remarks
replies
reports
responds
reveals
says
states
suggests
supports
tells us
thinks
wants to
wishes
wonders

Cite the Source

Recall from Chapter 1 that when you cite sources, you include the author’s or authors’ last names; date of
publication; and for direct quotations, the page number on which the quoted passage appears. If there is no page
number, use a paragraph number when available to indicate the location of the quotation.

Quick Tip!

Taking Notes for References

Every academic discipline requires that you submit a bibliography or reference page with your paper.
Recording this information in your notes will help you avoid committing plagiarism. Depending on the
style you are using, different pieces of information will be needed to complete your references. Here are
some key items to include in your notes when using APA Style.

If your resource is a book, make note of the author, title, publisher, date, and city of publication
or URL for ebooks.
For articles, make note of the author, article title, journal title, series number, volume number,
and date of the publication. DOIs or URLs should also be noted for electronic articles. When
using a URL, look for a permalink, permanent link, or stable URL rather than copying the URL
from your browser’s address bar.

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For websites, make note of the author, title of the document, title of the complete work, name of
the website, date of publication or last revision, URL, and date that you accessed the site.
To cite a lecture, video, film, radio program, or other less usual source, consult a style manual to
find out what information you will need to complete your bibliography or works cited page.

Precisely how do you insert this required information into your writing? You have two options. The first is to
include the full or last names of the authors directly in a sentence and the year of publication in parentheses
following the names. If directly quoting, include the page number where the quotation can be found at the end of
your sentence. Here are some examples.

Roxane Gay (2020) points out that . . .

Roxane Gay (2020) insists, “The disparities that normally fracture our culture are becoming even more
pronounced as we decide, collectively, what we choose to save—what deserves to be saved” (para. 9).

Your second option is to include all of the required information in parentheses at the end of the sentence. Here
are two examples.

Some argue that the distrust of experts and science has led to the spread of false information
(Niedringhaus, 2018).

According to one article, “the rise of fake news correlates with an increasing distrust of experts”
(Niedringhaus, 2018, p. 98).

Notice in the preceding example that quotation marks always have a beginning and end, occurring immediately
before the first word of the quotation and immediately after the last word. With the exception of block quotes,
periods are always placed after the end-of-sentence parentheses, as in (p. 132). This placement ensures that the
citation remains inside the sentence to which it corresponds.

Explain the Relevance

After introducing and citing the passage, you will need to explain the significance: How does this author’s idea
relate to your thesis? How does this data support your paragraph’s main idea? What are you trying to show here?
It is your responsibility as the writer to express your ideas clearly by interpreting the information for your
readers and identifying its significance. This step is what ties your evidence to your idea and is essential to
bringing the reader’s focus back to the point you are trying to make. Remember, this is your essay, so make your
own ideas central to the writing.

Here is an example of the ICE method at work in a paragraph from a student’s paper:

In the beginning stages, the juvenile justice system operated according to a paternalistic philosophy.1
This can be understood through the published words of Judge Julian Mack, who had a hand in the
establishment of the juvenile justice system. In 1909 he stated2 that this system should treat juveniles
“as a wise and merciful father handles his own child” (as cited in Scott & Steinberg, 2008, p. 16).3
Judge Mack viewed juveniles as children first. He envisioned a system that would protect and give
treatment to these young offenders so that they could become productive adults and saw no place for
criminal responsibility and punishment within this system.4

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Key:

1. Background
2. Introduction of source and context on why he is an authority on this topic
3. Quoted material along with citation
4. Explanation of the quotation. As seen here, aim for an explanation that is longer than the quotation itself

by carefully unpacking the ideas contained within the quotation.

With an understanding of intellectual property and the responsible uses of it fresh in his mind, Irwin goes back to
his paper and revisits his use of his sources. First, he makes sure that each thought that was not his own is cited.
He also checks to make sure that he has used the ICE method to integrate his sources into his paper.

Next Irwin reconsiders the way he’s presented his evidence. He wants his own ideas to be central, with his
sources providing the necessary support. He realizes that quotations are helpful in validating some of his ideas
but that paraphrases and summaries will help strengthen and balance his essay.

Quoting

When presenting your research, quoting passages from your sources can be an effective way to present your
findings and add support to your claims. The following are some suggestions for including direct quotations in
your academic papers.

Quote only the good stuff. Remember: Less is more. Don’t pad your essay with other people’s ideas.
You should not use quotations as fillers to make your page count. If a quotation doesn’t add substance to
your essay, don’t use it. On the other hand, if a quotation backs up a point you’ve made, especially if it
does so in language so skillful that you couldn’t possibly change it, use it! Finally, avoid using any
quotation you don’t understand. The ICE method requires that you explain it, so understanding it is
essential.
Keep quotations short, ideally about one to two sentences. When possible, trim the quotation to a
few key words or a phrase essential to getting the idea across. If you must include a quotation that is
more than 40 words long, “block the quotation” by starting it on a new line and indenting it. Here’s an
example.

In the graphic novel Killing and Dying, Tomine’s (2018) mother begins by describing the
flight back to California:

On our previous flight, in the opposite direction, you slept and squirmed on top of my legs.
What a surprise when the airline told me you were too old for that now, and I was required to
purchase a seat for you. (p. 76)

Note: When you block a quotation, place the period or other closing punctuation at the end of the final
sentence instead of after the parenthetical citation. For in-text citations within your paper that are not
block quotes, the citation is part of the sentence, and the period follows the parenthesis.

Make sure you copy quotations correctly. Misspellings and use of incorrect grammar or punctuation
affect your own credibility as a writer. A missed word here or there can also change the meaning of the
quotation. Accuracy indicates care for your work and ensures that the message is received as intended.
Use brackets when you alter a word or phrase from the quotation. For example: Di Domenico and
Visentin (2020) conclude, “To date, these new [deepfake and cheap fake] techniques are utilized
predominantly in politics, to discredit politicians or political organizations” (p. 414). The words inserted

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MangoStar_Studio/iStock/Getty Images Plus

Paraphrasing ideas or translating
information from a helpful graph from
your research is often necessary for your
paper. To avoid plagiarizing, read and
understand the material. Then type it out
in your own words and compare, and
don’t forget to cite.

in this case are only there to clarify the sentence. Avoid inserting or omitting words that change the
quotation’s meaning in any way.
Use an ellipsis when you omit words or phrases from the quotation. Use an ellipsis (three periods in
a row) when you omit any portion of a sentence. For example: Calvin Baker (2020) asserts that “our
problem is not race . . . it is the calculus of integration” (p. 11).
Avoid starting or ending a paragraph with a quotation. You should begin and conclude paragraphs
with your own ideas. The first sentence of a paragraph—which is known as the topic sentence or
assertion—should support the focus of the essay. In turn, the quotation supports the topic sentence. The
last sentence of the paragraph should be part of your analysis of the quotation or a restatement of your
paragraph’s main idea.

Paraphrasing

We have all watched a film or read a novel that we wanted to tell
others about. When you are describing it, you most likely say
what happened, how it happened, and why it happened in your
own words. This is paraphrasing—using your own words to
express someone else’s message or ideas.

When you paraphrase in writing, the ideas and meaning of the
original source must be maintained; the main ideas need to come
through, but the wording must be your own. And of course, you
need to give credit to the author by citing your source. As we
have mentioned, you don’t want to overuse quotes in your paper.
Paraphrasing is a great alternative. To paraphrase correctly, you
need to fully understand the original passage so that you can
write about it in your own words.

Guidelines for Paraphrasing
How do you paraphrase a source?

Read the original passage several times or until you are sure you understand it.
Put the original aside and try to write the main ideas in your own words. Say what the source says, but
no more, and try to reproduce the source’s emphasis.
Look closely at unfamiliar words, observing the exact sense in which the writer uses the words.
Avoid words or phrases that match the original too closely. If the wording of the paraphrase is too close
to the wording of the original, then it can be considered plagiarism.
If you …