Cross-Ownership and the Takeover Deterrence

Sten Nyberg

No 243, Working Paper Series from Research Institute of Industrial Economics

Abstract: Firms having significant shareholdings in one another is not an unusual phenomenon in countries where the law admits such ownership arrangements, like Sweden and Japan. In this paper the role of cross-ownership as means for deterring takeovers is examined in the framework of a simple two-firm, two-period model with raiders, differing with respect to their valuation of a potential target, turning up randomly. The paper argues the following points: If cross-ownership increases managerial influence - the consequences for the shareholders depend on the probability that the firm would have received a tender offer in absence of cross-ownership and managers benefit from it up to a point but their gains are negatively related to the their ability to resist takeover attempts.

Keywords: International firm ownership; takeover deterence; manager independence (search for similar items in EconPapers)
JEL-codes: F23 G34 M54 (search for similar items in EconPapers)
Pages: 21 pages
Date: 1989-12
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Related works:
Journal Article: Reciprocal shareholding and takeover deterrence (1995)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:iuiwop:0243

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