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Takeover bids, unconditional offer price and investor protection

de La Bruslerie, Hubert; Deffains-Crapsky, Catherine (2005), Takeover bids, unconditional offer price and investor protection, Review of Financial Economics, 14, 2, p. 103-126. http://dx.doi.org/10.1016/j.rfe.2004.07.001

Type
Article accepté pour publication ou publié
Date
2005
Journal name
Review of Financial Economics
Volume
14
Number
2
Publisher
Elsevier
Pages
103-126
Publication identifier
http://dx.doi.org/10.1016/j.rfe.2004.07.001
Metadata
Show full item record
Author(s)
de La Bruslerie, Hubert
Deffains-Crapsky, Catherine
Abstract (EN)
In this paper, we develop a contingent claim analysis on shareholders' right to sell unconditionally their shares at the acquisition bid price during a takeover bid procedure. Compared with a situation without any guarantee, this regulation brings about wealth transfer towards outside shareholders. Why, in an apparently irrational way, do outside shareholders, who may benefit from a price guarantee, not systematically sell their shares? That question emphasizes the outside shareholders' behavior. Using a real option valuation model to evaluate the price guarantee opportunity, we show that an equal treatment rule between controlling and outside shareholders may lead outside shareholders to sell their shares.
Subjects / Keywords
STOCKHOLDERS; BID price; STOCKS (Finance) -- Prices; CONSOLIDATION & merger of corporations; CAPITALISTS & financiers; DEBT-to-equity ratio
JEL
G3 - Corporate Finance and Governance
G34 - Mergers; Acquisitions; Restructuring; Corporate Governance
K2 - Regulation and Business Law

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