Takeover bids, unconditional offer price and investors protection

Hubert de La Bruslerie and Catherine Deffains-Crapsky ()
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Catherine Deffains-Crapsky: GRANEM - Groupe de Recherche Angevin en Economie et Management - UA - Université d'Angers - AGROCAMPUS OUEST - Institut National de l'Horticulture et du Paysage

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Abstract: In this paper, we develop a contingent claim analysis on shareholders' right to sell unconditionally their shares at the acquisition bid price during a takeover bid procedure. Compared with a situation without any guarantee, this regulation brings about wealth transfer towards outside shareholders. Why, in an apparently irrational way, do outside shareholders, who may benefit from a price guarantee, not systematically sell their shares? That question emphasizes the outside shareholders' behavior. Using a real option valuation model to evaluate the price guarantee opportunity, we show that an equal treatment rule between controlling and outside shareholders may lead outside shareholders to sell their shares.

Keywords: shareholders; finance; wealth transfer (search for similar items in EconPapers)
Date: 2005
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Published in Review of Financial Economics, 2005, 14 (2), ⟨10.1016/j.rfe.2004.07.001⟩

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Journal Article: Takeover bids, unconditional offer price and investor protection (2005)
Journal Article: Takeover bids, unconditional offer price and investor protection (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01947321

DOI: 10.1016/j.rfe.2004.07.001

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