Legal investor protection and takeovers

Mike Burkart, Denis Gromb, Holger M Mueller and Fausto Panunzi

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper examines the role of legal investor protection for the efficiency of the market for corporate control when bidders are financially constrained. In the model, stronger legal investor protection increases bidders' outside funding capacity. However, absent effective bidding competition, this does not improve efficiency, as the bid price, and thus bidders' need for funds, increases one-for-one with the pledgeable income. In contrast, under effective competition for the target, the increased outside funding capacity improves efficiency by making it less likely that more efficient but less wealthy bidders are outbid by less efficient but wealthier rivals.

JEL-codes: F3 G3 (search for similar items in EconPapers)
Date: 2014-06-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

Published in Journal of Finance, 1, June, 2014, 69(3), pp. 1129 - 1165. ISSN: 0022-1082

Downloads: (external link)
http://eprints.lse.ac.uk/69540/ Open access version. (application/pdf)

Related works:
Journal Article: Legal Investor Protection and Takeovers (2014)
Working Paper: Legal Investor Protection and Takeovers (2011)
Working Paper: Legal Investor Protection and Takeovers (2011)
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