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Incentives for Partial Acquisitions and Real Market Concentration

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  • Patricia Charléty
  • Marie-Cécile Fagart
  • Saïd Souam

Abstract

We analyze the incentives for a controlling shareholder to acquire silent or controlling shares in a competitor. When it occurs, the acquisition is detrimental to minority shareholders of his firm, or to the target, or even to both. The ownership structure of firms turns out to be a key variable. The possession of initial silent toeholds in rivals unambiguously encourages further partial acquisitions, both controlling and silent. However, a higher initial controlling share generally stimulates controlling acquisitions, but always discourages silent ones. Finally, indirect acquisitions through the controlled firm are always controlling and preferred when the targeted block is small.

Suggested Citation

  • Patricia Charléty & Marie-Cécile Fagart & Saïd Souam, 2009. "Incentives for Partial Acquisitions and Real Market Concentration," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 165(3), pages 508-534, September.
  • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200909)165:3_508:ifpaar_2.0.tx_2-x
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    References listed on IDEAS

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    1. Barclay, Michael J. & Holderness, Clifford G., 1989. "Private benefits from control of public corporations," Journal of Financial Economics, Elsevier, vol. 25(2), pages 371-395, December.
    2. Malueg, David A., 1992. "Collusive behavior and partial ownership of rivals," International Journal of Industrial Organization, Elsevier, vol. 10(1), pages 27-34, March.
    3. Patricia Charlety & Marie-Cécile Fagart & Saïd Souam, 2001. "Prises de participations et expropriation des actionnaires minoritaires," Working Papers 2001-42, Center for Research in Economics and Statistics.
    4. Eirik S. Amundsen & Lars Bergman, 2002. "Will Cross-Ownership Re-Establish Market Power in the Nordic Power Market?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 73-95.
    5. Alley, Wilson A, 1997. "Partial Ownership Arrangements and Collusion in the Automobile Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 45(2), pages 191-205, June.
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    Citations

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    Cited by:

    1. Heiko Karle & Tobias J. Klein & Konrad O. Stahl, 2011. "Ownership and Control in a Competitive Industry," CESifo Working Paper Series 3380, CESifo Group Munich.
    2. Patricia Charléty & Marie-Cécile Fagart & Saïd Souam, 2017. "Quorum Rules and Shareholder Power," EconomiX Working Papers 2017-35, University of Paris Nanterre, EconomiX.

    More about this item

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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