Unique equilibrium in a model of takeovers involving block trades and tender offers

Frederick Dongchuhl Oh and Sangkyu Baek

Finance Research Letters, 2015, vol. 15, issue C, 208-214

Abstract: Small shareholders face coordination problems during takeovers. Without common knowledge of a bidder’s negotiation ability with an incumbent blockholder in support of a takeover, the probability of takeover success is uniquely determined if the private information available to small shareholders regarding the bidder’s negotiation ability is precise enough. An analysis of the unique equilibrium demonstrates that the earmarked freeze-out amount and the expected amount of abnormal returns affect the takeover’s outcome. Moreover, the effect of the blockholder’s size on the takeover’s outcome is determined by the relative size of the earmarked freeze-out amount and the expected amount of abnormal returns.

Keywords: Takeover; Tender offer; Global game; Blockholder; Freeze-out; Abnormal returns (search for similar items in EconPapers)
JEL-codes: D82 G34 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:15:y:2015:i:c:p:208-214

DOI: 10.1016/j.frl.2015.09.011

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