Legal investor protection and takeovers

Burkart, Mike ORCID: 0000-0002-0954-4499, Gromb, Denis, Mueller, Holger M and Panunzi, Fausto (2014) Legal investor protection and takeovers. Journal of Finance, 69 (3). 1129 - 1165. ISSN 0022-1082

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Abstract

This paper examines the role of legal investor protection for the efficiency of the market for corporate control when bidders are financially constrained. In the model, stronger legal investor protection increases bidders' outside funding capacity. However, absent effective bidding competition, this does not improve efficiency, as the bid price, and thus bidders' need for funds, increases one-for-one with the pledgeable income. In contrast, under effective competition for the target, the increased outside funding capacity improves efficiency by making it less likely that more efficient but less wealthy bidders are outbid by less efficient but wealthier rivals.

Item Type:	Article
Official URL:	https://onlinelibrary.wiley.com/journal/15406261
Additional Information:	© 2014 the American Finance Association
Divisions:	Finance
Subjects:	H Social Sciences > HG Finance
Date Deposited:	22 Feb 2017 09:49
Last Modified:	12 Dec 2024 00:47
URI:	http://eprints.lse.ac.uk/id/eprint/69540

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