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Security-voting structure and bidder screening

At, Christian and Burkart, Mike and Lee, Samuel (2011) Security-voting structure and bidder screening. Journal of Financial Intermediation, 20 (3). pp. 458-476. ISSN 1042-9573

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Identification Number: 10.1016/j.jfi.2010.10.001

Abstract

This paper demonstrates that non-voting shares can promote takeovers. When the bidder has private information, shareholders may refuse to tender because they suspect to sell at an ex post unfavourable price. The ensuing friction in the sale of cash flow rights can prevent an efficient change of control. Separating cash flow and voting rights alters the degree of cross-subsidization among bidder types. It can therefore be used as an instrument to promote takeover activity and to discriminate between efficient and inefficient bidders. The optimal fraction of non-voting shares decreases with managerial ability, implying an inverse relationship between firm value and non-voting shares.

Item Type: Article
Official URL: https://www.journals.elsevier.com/journal-of-finan...
Additional Information: © 2010 Elsevier
Subjects: H Social Sciences > HG Finance
Sets: Departments > Finance
Date Deposited: 22 Feb 2017 10:00
Last Modified: 01 Mar 2017 12:19
URI: http://eprints.lse.ac.uk/id/eprint/69542

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