IDEAS home Printed from https://ideas.repec.org/a/oup/rfinst/v32y2019i8p3266-3297..html
   My bibliography  Save this article

Freeze-Out Mergers

Author

Listed:
  • Elif Dalkır
  • Mehmet Dalkır
  • Doron Levit

Abstract

Do freeze-out mergers mitigate the free-rider problem of corporate takeovers? We study this question in a tender offer model with finitely many shareholders. Under a freeze-out merger, minority shareholders expect to receive the original offer price whether or not they tender their shares. We show that the ability to freeze out shareholders increases the raider’s expected profit. However, as the number of shareholders gets arbitrarily large, the raider’s expected profit in equilibrium converges to zero for any freeze-out clause with an ownership threshold that is strictly above simple majority. In this sense, freeze-out mergers do not solve the free-rider problem. Received September 17, 2016; editorial decision June 3, 2018 by Editor Francesca Cornelli.

Suggested Citation

  • Elif Dalkır & Mehmet Dalkır & Doron Levit, 2019. "Freeze-Out Mergers," The Review of Financial Studies, Society for Financial Studies, vol. 32(8), pages 3266-3297.
    • Handle: RePEc:oup:rfinst:v:32:y:2019:i:8:p:3266-3297.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/rfs/hhy102
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:rfinst:v:32:y:2019:i:8:p:3266-3297.. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://edirc.repec.org/data/sfsssea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.