The Evolution of the Market for Corporate Control

Mike Burkart, Samuel Lee and Paul Voss
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Mike Burkart: LSE - London School of Economics and Political Science
Samuel Lee: Santa Clara University
Paul Voss: HEC Paris - Ecole des Hautes Etudes Commerciales, CEPR - Center for Economic Policy Research

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Abstract: We consider an informed large shareholder who can choose between making a takeover bid herself and initiating a sale to another acquirer. Such takeover activism complements direct takeovers because the very choice mitigates the asymmetric information problem, thereby improving efficiency. As more investors enter the market for corporate control, takeover activism increasingly replaces direct takeovers as the prevailing mode of disciplinary control change---matching the evolution in practice. Our model shows how such an evolution, characterized by a symbiotic relationship between investor activism and private equity, arises to overcome asymmetric information and collective action problems through intermediated transactions.

Keywords: Tender offers; takeover activism; free-rider problem; asymmetric information; market for corporate control (search for similar items in EconPapers)
Date: 2024-01-29
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Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-05562833

DOI: 10.2139/ssrn.4709037

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