The Case Against Board Veto in Corporate Takeovers
AbstractThis Paper argues that once undistorted shareholder choice is ensured – which can be done by making it necessary for hostile bidders to win a vote of shareholder support – boards should not have veto power over takeover bids. The Paper considers all of the arguments that have been offered for board veto – including ones based on analogies to other corporate decisions, directors’ superior information, bargaining by management, pressures on managers to focus on the short-run, inferences from IPO charters, interests of long-term share-holders, aggregate shareholder wealth, and protection of stakeholders. Examining these arguments both at the level of theory and in light of all available empirical evidence, the Paper concludes that none of them individually, nor all of them taken together, warrants a board veto. Finally, the Paper discusses the implications that the analysis has for judicial review of defensive tactics.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3445.
Date of creation: Jul 2002
Date of revision:
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Other versions of this item:
- Lucian Arye Bebchuk, 2002. "The Case Against Board Veto in Corporate Takeovers," NBER Working Papers 9078, National Bureau of Economic Research, Inc.
- G30 - Financial Economics - - Corporate Finance and Governance - - - General
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-02-18 (All new papers)
- NEP-CFN-2003-02-18 (Corporate Finance)
- NEP-COM-2003-02-18 (Industrial Competition)
- NEP-LAW-2003-02-18 (Law & Economics)
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