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Takeover bids, unconditional offer price and investor protection

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  • Hubert de la Bruslerie
  • Catherine Deffains‐Crapsky

Abstract

In this paper, we develop a contingent claim analysis on shareholders' right to sell unconditionally their shares at the acquisition bid price during a takeover bid procedure. Compared with a situation without any guarantee, this regulation brings about wealth transfer towards outside shareholders. Why, in an apparently irrational way, do outside shareholders, who may benefit from a price guarantee, not systematically sell their shares? That question emphasizes the outside shareholders' behavior. Using a real option valuation model to evaluate the price guarantee opportunity, we show that an equal treatment rule between controlling and outside shareholders may lead outside shareholders to sell their shares.

Suggested Citation

  • Hubert de la Bruslerie & Catherine Deffains‐Crapsky, 2005. "Takeover bids, unconditional offer price and investor protection," Review of Financial Economics, John Wiley & Sons, vol. 14(2), pages 103-126.
    • Handle: RePEc:wly:revfec:v:14:y:2005:i:2:p:103-126
    DOI: 10.1016/j.rfe.2004.07.001
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    References listed on IDEAS

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    Cited by:

    1. Salma Fourati, 2008. "Transferts négociés de blocs de contrôle, bénéfices privés et protection des actionnaires minoritaires," Post-Print halshs-00524890, HAL.

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