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Corporate Takeovers in the Laboratory When Shareholders Own More Than One Share

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  • Cadsby, C Bram
  • Maynes, Elizabeth

Abstract

Tendering decisions of shareholders endowed with multiple shares are studied in the laboratory to test game-theoretic models of the tendering process. Tendered shares cycle around the equilibrium level. Contrary to game-theoretic predictions, bid level and bid type affect the number of shares tendered and the bid success rate. When players are given unequal endowments of shares, an equal proportion strategy organizes the data better than B. Holmstrom and B. Nalebuff's (1992) symmetric focal equilibrium in which larger shareholders tender down to a common share level. However, large shareholders often tender proportionately more shares than small shareholders. Copyright 1998 by University of Chicago Press.

Suggested Citation

  • Cadsby, C Bram & Maynes, Elizabeth, 1998. "Corporate Takeovers in the Laboratory When Shareholders Own More Than One Share," The Journal of Business, University of Chicago Press, vol. 71(4), pages 537-572, October.
    • Handle: RePEc:ucp:jnlbus:v:71:y:1998:i:4:p:537-72
    DOI: 10.1086/209756
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    Citations

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    Cited by:

    1. Ann B. Gillette & Thomas H. Noe, 2006. "If at First You Don't Succeed: The Effect of the Option to Resolicit on Corporate Takeovers," Review of Financial Studies, Society for Financial Studies, vol. 19(2), pages 561-603.
    2. Mike Burkart & Denis Gromb & Fausto Panunzi, 2006. "Minority Blocks and Takeover Premia," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 162(1), pages 32-49, March.
    3. Ann B. Gillette & Thomas H. Noe, 2000. "If at first you don't succeed: an experimental investigation of the impact of repetition options on corporate takeovers," FRB Atlanta Working Paper 2000-9, Federal Reserve Bank of Atlanta.
    4. Bram Cadsby, C. & Maynes, Elizabeth, 2005. "Gender, risk aversion, and the drawing power of equilibrium in an experimental corporate takeover game," Journal of Economic Behavior & Organization, Elsevier, vol. 56(1), pages 39-59, January.
    5. Edward Cartwright & Anna Stepanova, 2017. "Efficiency in a forced contribution threshold public good game," International Journal of Game Theory, Springer;Game Theory Society, vol. 46(4), pages 1163-1191, November.
    6. Federica Alberti & Edward J. Cartwright, 2016. "Full agreement and the provision of threshold public goods," Public Choice, Springer, vol. 166(1), pages 205-233, January.
    7. Ryan Oprea, 2008. "Free Cash Flow and Takeover Threats: An Experimental Study," Southern Economic Journal, John Wiley & Sons, vol. 75(2), pages 351-366, August.
    8. Scott Barrett, 2007. "The Smallpox Eradication Game," Public Choice, Springer, vol. 130(1), pages 179-207, January.

    More about this item

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • G3 - Financial Economics - - Corporate Finance and Governance

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