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To scheme or bid? Choice of takeover method and impact on premium

Author

Listed:
  • Martin Bugeja

    (Accounting Discipline Group, University of Technology, Sydney, Australia)

  • Raymond da Silva Rosa
  • HY Izan

    (University of Western Australia, Australia)

  • Susan Ngan

    (Murdoch University, Australia)

Abstract

In recent years there has been an increasing use of members’ schemes of arrangement to bring about a change in corporate control. This increasing use of schemes has been criticised in public quarters on the basis that unlike takeovers, schemes are not subject to the Eggleston principles and have arguably led to target shareholders receiving lower offer prices. This study provides the first large-sample empirical evidence on differences between schemes and takeovers. We find that the likelihood of the use of schemes significantly increases when target firm ownership concentration is higher and when the bidder has a lower toehold. Scheme usage is also more likely for larger targets and bidders with higher leverage. Consistent with public criticisms of schemes, we find that after controlling for self-selection premiums in schemes are significantly lower than those in takeovers.

Suggested Citation

  • Martin Bugeja & Raymond da Silva Rosa & HY Izan & Susan Ngan, 2016. "To scheme or bid? Choice of takeover method and impact on premium," Australian Journal of Management, Australian School of Business, vol. 41(2), pages 212-243, May.
    • Handle: RePEc:sae:ausman:v:41:y:2016:i:2:p:212-243
    DOI: 10.1177/0312896214565120
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    References listed on IDEAS

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    Cited by:

    1. Faff, Robert & Prasadh, Shyaam & Shams, Syed, 2019. "Merger and acquisition research in the Asia-Pacific region: A review of the evidence and future directions," Research in International Business and Finance, Elsevier, vol. 50(C), pages 267-278.
    2. Millicent Chang & Andrew B. Jackson & Marvin Wee, 2018. "A review of research on regulation changes in the Asia‐Pacific region," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 58(3), pages 635-667, September.

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    More about this item

    Keywords

    Mergers and acquisitions; schemes of arrangements; takeovers;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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