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Does the Free-rider Problem Occur in Corporate Takeovers? Evidence from Laboratory Markets

Author

Listed:
  • Hirota, S.
  • Saijo, T.
  • Hamaguchi, Y.
  • Kawagoe, T.

Abstract

We explore experimentally whether the free-rider problem occurs in corporate takeovers. While Grossman and Hart's (1980) classical proposition states that due to the free-rider problem takeovers never succeed, we observe a considerable number of successful takeovers in real capital markets. To solve this paradox, we conducted an experimental study by constructing simple laboratory markets of atomistic shareholders.

Suggested Citation

  • Hirota, S. & Saijo, T. & Hamaguchi, Y. & Kawagoe, T., 2000. "Does the Free-rider Problem Occur in Corporate Takeovers? Evidence from Laboratory Markets," ISER Discussion Paper 0512, Institute of Social and Economic Research, Osaka University.
    • Handle: RePEc:dpr:wpaper:0512
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    File URL: https://www.iser.osaka-u.ac.jp/library/dp/2000/dp0512.pdf
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    Cited by:

    1. Ann B. Gillette & Thomas H. Noe, 2006. "If at First You Don't Succeed: The Effect of the Option to Resolicit on Corporate Takeovers," The Review of Financial Studies, Society for Financial Studies, vol. 19(2), pages 561-603.

    More about this item

    Keywords

    CAPITAL ; MARKET ; SHAREHOLDERS;
    All these keywords.

    JEL classification:

    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • G1 - Financial Economics - - General Financial Markets

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