Divesting ownership in a rival

Duarte Brito, Luis Cabral and Helder Vasconcelos

International Journal of Industrial Organization, 2014, vol. 34, issue C, 9-24

Abstract: We examine the consumer welfare effect of a firm's partial ownership of a competitor and compare the implications of alternative forms of divestiture. We identify conditions under which turning voting shares into non-voting shares is preferable to selling the shares to the firm's current shareholders (an option frequently chosen). We also show that selling the voting shares to a large independent shareholder is preferable to selling them to small shareholders. We provide additional theoretical results and apply them to the divestiture of Portugal Telecom's holdings in PTM.

Keywords: Oligopoly; Divestiture; Control; Preferred stock (search for similar items in EconPapers)
JEL-codes: L13 L41 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:34:y:2014:i:c:p:9-24

DOI: 10.1016/j.ijindorg.2014.02.007

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