Minority Buyouts and Ownership Characteristics: Evidence From the Toronto Stock Exchange

Brian F. Smith and Ben Amoako-Adu

Financial Management, 1992, vol. 21, issue 2

Abstract: We compare the impact on target shareholder wealth of a sample of 59 Toronto Stock Exchange minority buyouts by controlling shareholders and 113 buyouts involving noncontrolling bidders. The results indicate that on the announcement day, target shareholders' wealth increases by 20.7% for the minority buyouts and 15.9% for cases involving buyouts by noncontrolling bidders. After controlling for the effect of firm size, type of payment, form of transaction, multiple bidding and distribution of votes among shareholders, minority buyouts are found to provide no significantly different returns compared to takeover offers from noncontrolling bidders. The paper also examines the ownership factors affecting shareholder returns for the different types of buyouts. While no relationship is found between returns and prior holdings of the bidder, shareholder returns in minority buyouts are positively related to the percentage of shares held by other large shareholders.

Date: 1992
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