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The Effect of Institutional Investors’ Voice on the Terms and Outcome of Freeze-out Tender Offers

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  • Beni Lauterbach

    (School of Business Administration, Bar-Ilan University, Ramat Gan 52900, Israel2ECGI, Belgium)

  • Yevgeny Mugerman

    (School of Business Administration, Bar-Ilan University, Ramat Gan 52900, Israel2ECGI, Belgium)

Abstract

We study the impact of institutional investors’ “voice” on 201 going private tender offers by controlling shareholders (“freeze-out” offers) in Israel. Israeli regulatory intervention in freeze-out tender offers is relatively mild; thus, institutional investors’ activism becomes crucial. We find that institutional voice has dual effects. On one hand, when there are pre-negotiations with institutional investors’ (their voice is heard), accepted offers’ premiums increase. On the other hand, when institutional investors express their voice, yet reject the offer, these rejections appear to hurt shareholders’ value. We also document significant institutional investor exit after rejected offers, especially after offers preceded by voice (pre-negotiations with institutional investors).

Suggested Citation

  • Beni Lauterbach & Yevgeny Mugerman, 2020. "The Effect of Institutional Investors’ Voice on the Terms and Outcome of Freeze-out Tender Offers," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 10(01), pages 1-33, February.
    • Handle: RePEc:wsi:qjfxxx:v:10:y:2020:i:01:n:s2010139220500020
    DOI: 10.1142/S2010139220500020
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    Cited by:

    1. Efrat Dressler & Yevgeny Mugerman, 2023. "Doing the Right Thing? The Voting Power Effect and Institutional Shareholder Voting," Journal of Business Ethics, Springer, vol. 183(4), pages 1089-1112, April.

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