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A Game-Theoretic Model of Corporate Takeovers by Major Stockholders

Author

Listed:
  • Imelda Yeung Powers

    (Yale School of Organization and Management, Box 1A, New Haven, Connecticut 06520)

Abstract

This paper models the exchange between cash and decision power among all stockholders in a company with two major stockholders. It investigates the feasibility and profitability of corporate takeovers, and shows the existence, under some conditions, of pairs of Nash equilibrium strategies that result in one major stockholder taking control of the company. Finally, it solves for threat-resistant strategies (takeover offers that will not be outbid) for both major players, and concludes with a threat-resistant Nash equilibrium solution to the model.

Suggested Citation

  • Imelda Yeung Powers, 1987. "A Game-Theoretic Model of Corporate Takeovers by Major Stockholders," Management Science, INFORMS, vol. 33(4), pages 467-483, April.
    • Handle: RePEc:inm:ormnsc:v:33:y:1987:i:4:p:467-483
    DOI: 10.1287/mnsc.33.4.467
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    Cited by:

    1. John Board & Charles Sutcliffe & William T. Ziemba, 2003. "Applying Operations Research Techniques to Financial Markets," Interfaces, INFORMS, vol. 33(2), pages 12-24, April.
    2. Lukas, Elmar & Pereira, Paulo J. & Rodrigues, Artur, 2019. "Designing optimal M&A strategies under uncertainty," Journal of Economic Dynamics and Control, Elsevier, vol. 104(C), pages 1-20.

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