Buyouts in Large Companies
AbstractWe consider legal rules that determine the price at which minority shareholders can be excluded from the corporate enterprise after a change in control. These rules affect investment after such a change as well as the probability of the change itself. Our principal results are that minority shareholders should be given the value that their interest would have had were no later investment made; and that this rule is best implemented, in large companies, by awarding the minority the pre-investment market value of their shares. The former aspect of our proposal is consistent with much current law but is rejected by many modern law reformers; the latter aspect of our proposal is novel.
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Bibliographic InfoPaper provided by Yale School of Management in its series Yale School of Management Working Papers with number ysm66.
Date of creation: 18 May 1998
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Other versions of this item:
- G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
- K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
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- Atanasov, Vladimir & Black, Bernard & Ciccotello, Conrad & Gyoshev, Stanley, 2010. "How does law affect finance? An examination of equity tunneling in Bulgaria," Journal of Financial Economics, Elsevier, vol. 96(1), pages 155-173, April.
- Maug, Ernst, 2006. "Efficiency and fairness in minority freezeouts: Takeovers, overbidding, and the freeze-in problem," International Review of Law and Economics, Elsevier, vol. 26(3), pages 355-379, September.
- Ljungqvist, Alexander & Habib, Michel Antoine & Chemla, Gilles, 2007. "An Analysis of Shareholder Agreements," Economics Papers from University Paris Dauphine 123456789/4112, Paris Dauphine University.
- Lucian Arye Bebchuk & Marcel Kahan, 1999. "The 'Lemons Effect' in Corporate Freeze-Outs," NBER Working Papers 6938, National Bureau of Economic Research, Inc.
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