Buyouts in Large Companies

Benjamin Hermalin and Alan Schwartz

Yale School of Management Working Papers from Yale School of Management

Abstract: We consider legal rules that determine the price at which minority shareholders can be excluded from the corporate enterprise after a change in control. These rules affect investment after such a change as well as the probability of the change itself. Our principal results are that minority shareholders should be given the value that their interest would have had were no later investment made; and that this rule is best implemented, in large companies, by awarding the minority the pre-investment market value of their shares. The former aspect of our proposal is consistent with much current law but is rejected by many modern law reformers; the latter aspect of our proposal is novel.

JEL-codes: G34 G38 K22 (search for similar items in EconPapers)
Date: 1998-05-18
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Buyouts in Large Companies (1996)
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Persistent link: https://EconPapers.repec.org/RePEc:ysm:somwrk:ysm66

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