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Ownership structure and target returns

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Author Info

  • Bauguess, Scott W.
  • Moeller, Sara B.
  • Schlingemann, Frederik P.
  • Zutter, Chad J.
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    Abstract

    Contrary to past literature, ownership defined as "all officers and directors" of the target firm has no association with target returns. Rather, we find that inside (managerial) ownership has a positive relation with target returns, whereas active-outside (non-managing director) ownership has a negative relation with target returns. Using accounting-based versus market-based performance measures, we find that the relation between inside ownership and target returns is best explained by takeover anticipation. Using bidder and synergy returns we find that the relation between outside ownership and target returns is best explained by outsiders' willingness to share gains with the bidder. While the relations are more pronounced for non-tender deals, they also hold for tender offers when active-outside ownership is corporate rather than institutional.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Corporate Finance.

    Volume (Year): 15 (2009)
    Issue (Month): 1 (February)
    Pages: 48-65

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    Handle: RePEc:eee:corfin:v:15:y:2009:i:1:p:48-65

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    Web page: http://www.elsevier.com/locate/jcorpfin

    Related research

    Keywords: Target returns Ownership Acquisitions Firm value;

    References

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    Cited by:
    1. Anagnostopoulou, Seraina C. & Tsekrekos, Andrianos E., 2013. "Do firms that wish to be acquired manage their earnings? Evidence from major European countries," International Review of Financial Analysis, Elsevier, vol. 30(C), pages 57-68.
    2. Burns, Natasha & Kedia, Simi & Lipson, Marc, 2010. "Institutional ownership and monitoring: Evidence from financial misreporting," Journal of Corporate Finance, Elsevier, vol. 16(4), pages 443-455, September.
    3. Robinson, David T., 2009. "Size, ownership and the market for corporate control," Journal of Corporate Finance, Elsevier, vol. 15(1), pages 80-84, February.
    4. Selim Aren & Lutfihak Alpkan & Bulent Sezen & Ziya Alper Guncu, 2011. "Drivers of firms’ debt ratios: evidence from Taiwanese and Turkish firms," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 13(1), pages 53-70, May.
    5. Lo, Agnes W.Y. & Wong, Raymond M.K. & Firth, Michael, 2010. "Can corporate governance deter management from manipulating earnings? Evidence from related-party sales transactions in China," Journal of Corporate Finance, Elsevier, vol. 16(2), pages 225-235, April.
    6. Rose, Morgan J., 2009. "Heterogeneous impacts of staggered boards by ownership concentration," Journal of Corporate Finance, Elsevier, vol. 15(1), pages 113-128, February.
    7. Netter, Jeffry & Poulsen, Annette & Stegemoller, Mike, 2009. "The rise of corporate governance in corporate control research," Journal of Corporate Finance, Elsevier, vol. 15(1), pages 1-9, February.

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