Expropriation vs. Proportional Sharing in Corporate Acquisitions

Mara Faccio () and David Stolin
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David Stolin: Toulouse Business School

Journal of Business, 2006, vol. 79, issue 3, pages 1413-1444

Abstract: An important and growing literature in finance points to existence of considerable benefits to being a controlling shareholder. At the same time, the well-established literature on mergers finds these key corporate events to be subject to agency costs. Relying on these two arguments, we employ a novel application of the Bertrand et al. (2002) insight to study the hypothesis that controlling shareholders use acquisitions to expropriate resources to their benefit. The findings do not allow us to reject the null hypothesis of proportional sharing of acquisition gains in favor of the alternative hypothesis of expropriation of bidder's minority shareholders.

Date: 2006
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