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Security-voting structure and bidder screening

Christian At, Mike Burkart () and Samuel Lee

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

Abstract: This paper demonstrates that non-voting shares can promote takeovers. When the bidder has private information, shareholders may refuse to tender because they suspect to sell at an ex post unfavourable price. The ensuing friction in the sale of cash flow rights can prevent an efficient change of control. Separating cash flow and voting rights alters the degree of cross-subsidization among bidder types. It can therefore be used as an instrument to promote takeover activity and to discriminate between efficient and inefficient bidders. The optimal fraction of non-voting shares decreases with managerial ability, implying an inverse relationship between firm value and non-voting shares.

Keywords: Tender offers; One share – one vote; Asymmetric information (search for similar items in EconPapers)
JEL-codes: F3 G3 (search for similar items in EconPapers)
Date: 2011-07
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Published in Journal of Financial Intermediation, July, 2011, 20(3), pp. 458-476. ISSN: 1042-9573

Downloads: (external link)
http://eprints.lse.ac.uk/69542/ Open access version. (application/pdf)

Related works:
Journal Article: Security-voting structure and bidder screening (2011) Downloads
Working Paper: Security Voting Structure and Bidder Screening (2011)
Working Paper: Security-Voting Structure and Bidder Screening (2007) Downloads
Working Paper: Security-voting structure and bidder screening (2007) Downloads
Working Paper: Security-Voting Structure and Bidder Screening (2007) Downloads
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