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Why higher takeover premia protect minority shareholders

Burkart, Mike ORCID: 0000-0002-0954-4499, Gromb, Denis and Panunzi, Fausto (1998) Why higher takeover premia protect minority shareholders. Journal of Political Economy, 106 (1). pp. 172-204. ISSN 0022-3808

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Identification Number: 10.1086/250006


Posttakeover moral hazard by the acquirer and free‐riding by the target shareholders lead the former to acquire as few sharcs as necessary to gain control. As moral hazard is most severe under such low ownership concentration, inefficiencies arise in successful takeovers. Moreover, share supply is shown to be upward‐sloping. Rules promoting ownership concentration limit both agency costs and the occurrence of takeovers. Furthermore, higher takeover premia induced by competition translate into higher ownership concen‐tration and are thus beneficial. Finally, one share‐one vote and simple majority are generally not optimal, and socially optimal rules need not emerge through private contracting.

Item Type: Article
Official URL:
Additional Information: © 1998 The University of Chicago
Divisions: Finance
Subjects: H Social Sciences > HG Finance
Date Deposited: 22 Feb 2017 10:43
Last Modified: 20 Oct 2021 00:41

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