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Takeovers, market monitoring, and international corporate governance

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  • Praveen Kumar
  • Latha Ramchand
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    Abstract

    We theoretically and empirically examine the role of international takeover markets in curtailing dominant shareholder moral hazard for firms with higher value-added from acquisitions. In equilibrium, such firms strategically list shares in the markets of their targets and voluntarily dilute dominant shareholder control through capital-raising events to lower their expected acquisition costs. Empirical tests, using a sample of foreign firms cross-listing on U.S. stock exchanges during 1990-2003, support the framework. We find a strong influence of post-listing dilution of dominant shareholder control through capital-raising events on the likelihood of acquisitions and their cost to the acquirers, in both U.S. and non-U.S. markets. Copyright (c) 2008, RAND.

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    Bibliographic Info

    Article provided by RAND Corporation in its journal The RAND Journal of Economics.

    Volume (Year): 39 (2008)
    Issue (Month): 3 ()
    Pages: 850-874

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    Handle: RePEc:bla:randje:v:39:y:2008:i:3:p:850-874

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    Cited by:
    1. Ayyagari, Meghana & Doidge, Craig, 2010. "Does cross-listing facilitate changes in corporate ownership and control?," Journal of Banking & Finance, Elsevier, vol. 34(1), pages 208-223, January.

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