Equal opportunity rule vs. market rule in transfer of control: How can private benefits help to provide an answer?
de La Bruslerie, Hubert (2013), Equal opportunity rule vs. market rule in transfer of control: How can private benefits help to provide an answer?, Journal of corporate finance, 23, p. 88–107. http://dx.doi.org/10.1016/j.jcorpfin.2013.07.007
TypeArticle accepté pour publication ou publié
External document linkhttp://halshs.archives-ouvertes.fr/halshs-00937543
Journal nameJournal of corporate finance
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Author(s)de La Bruslerie, Hubert
Abstract (EN)Having been introduced in the European Union and in many other countries, the equal opportunity rule is seen as protecting investors in the event of a transfer of control. This rule should be analyzed in a context of appropriation of private benefits between the new controlling shareholders and the outside investors. Both parties need to design a new implicit contract to share the firm's ownership. Using a signaling model, we show that the new controlling shareholder issues signals to outside shareholders to deliver private information on a firm's future economic return and her private rate of appropriation. The ownership stake of the controlling shareholder and the premium embedded in the acquisition price are key parameters. In a controlling ownership system, the equal opportunity rule modifies the relative behavior of controlling and outside shareholders. The quality of information deteriorates but the discipline on appropriation may become stronger.
Subjects / KeywordsEqual opportunity rule; transfer of control; takeover; controlling shareholder; investors protection; private benefits
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