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Why higher takeover premia protect minority shareholders

Mike Burkart (), Denis Gromb and Fausto Panunzi

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

Abstract: Posttakeover moral hazard by the acquirer and free‐riding by the target shareholders lead the former to acquire as few sharcs as necessary to gain control. As moral hazard is most severe under such low ownership concentration, inefficiencies arise in successful takeovers. Moreover, share supply is shown to be upward‐sloping. Rules promoting ownership concentration limit both agency costs and the occurrence of takeovers. Furthermore, higher takeover premia induced by competition translate into higher ownership concen‐tration and are thus beneficial. Finally, one share‐one vote and simple majority are generally not optimal, and socially optimal rules need not emerge through private contracting.

JEL-codes: F3 G3 (search for similar items in EconPapers)
Date: 1998-02
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Published in Journal of Political Economy, February, 1998, 106(1), pp. 172-204. ISSN: 0022-3808

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Journal Article: Why Higher Takeover Premia Protect Minority Shareholders (1998) Downloads
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