Merger Control With Transfers from the Capital Gains Tax and Asset Divestments

Arnaud Féral ()
Additional contact information
Arnaud Féral: THEMA, Department of Economics, Cergy-Pontoise University

No 2006-05, THEMA Working Papers from THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise

Abstract: In a Cournot model of takeover under asymmetric information, we identify a link between efficiency gains and structural remedies, we show that more efficient Insiders are asked to divest a bigger part of their assets. Aware that a unique tool is insufficient to make Insider revealing their type, we allow the Antitrust Agency to choose the mix of cash and stock used as payment for the target, which indirectly defines a transfer. Relying on the medium of paiement literature we show that the merger is even more costly for Insiders when the amount of cash in the mix bid is more important, because of capital gains tax compensations. We introduce a relevant limited liability problem in the model, since the AA cannot ask higher transfers than those underlying to the all cash procedure. In this context we show that inefficient Insiders divest more than their First Best and make an all cash offer, whereas efficient Insider divest their First best and incorporate less cash in the global bid.

Keywords: Merger control; structural remedies; asymmetric information; Medium of paiement; Limited liability (search for similar items in EconPapers)
JEL-codes: D82 L41 L51 (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-bec, nep-fmk and nep-ind
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.u-cergy.fr/IMG/documents//2006-05.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.u-cergy.fr/IMG/documents//2006-05.pdf [302 Found]--> https://www.u-cergy.fr/IMG/documents//2006-05.pdf [301 Moved Permanently]--> https://www.cyu.fr/IMG/documents//2006-05.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ema:worpap:2006-05

Access Statistics for this paper

More papers in THEMA Working Papers from THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise Contact information at EDIRC.
Bibliographic data for series maintained by Stefania Marcassa ( this e-mail address is bad, please contact ).