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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

Type
Article accepté pour publication ou publié
External document link
http://halshs.archives-ouvertes.fr/halshs-00937543
Date
2013-12
Journal name
Journal of corporate finance
Volume
23
Publisher
Elsevier
Pages
88–107
Publication identifier
http://dx.doi.org/10.1016/j.jcorpfin.2013.07.007
Metadata
Show full item record
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 / Keywords
Equal opportunity rule; transfer of control; takeover; controlling shareholder; investors protection; private benefits
JEL
G3 - Corporate Finance and Governance
G38 - Government Policy and Regulation
K2 - Regulation and Business Law
G34 - Mergers; Acquisitions; Restructuring; Corporate Governance
G30 - General

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