If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. AbstractPurpose -The purpose of this paper is to examine the effects of golden parachutes on shareholders' wealth when the measure is used as a compensation device instead of a takeover defense. The results show that the adoption of the measure has a negative influence on shareholders' wealth. These negative results are more prevalent for firms with an operating performance above their industry peers and are significantly influenced by the previous performance of the firm and the size of the golden parachute. Design/methodology/approach -Event study and regression analysis. Findings -The results show that the adoption of the measure has a negative influence on shareholders' wealth. These negative results are more prevalent for firms with an operating performance above their industry peers and are significantly influenced by the previous performance of the firm and the size of the golden parachute. Practical implications -Investors will have more information about the reaction of stock markets at the announcement of golden parachutes. Originality/value -The paper presents a new evaluation of the adoption of golden parachutes on shareholders' wealth when the measure is used as a compensation device instead of a takeover defense.