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Takeover deterrents and cross partial ownership: The case of golden shares

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  • Jean‐Philippe Serbera
  • John Fry

Abstract

We analyse takeovers in an industry with bilateral capital‐linked firms in cross partial ownership (CPO). Before merger, CPO reduces the profitability of involved firms, confirming the “outsider effect.” However, the impact of CPO upon merger profitability is two‐sided in a Cournot setting. CPO, by cointegrating profits, increases output collusion leading to anticompetitive effects with facilitated mergers in most cases. Nonetheless, a protective threshold exists for which CPO arrangements can reduce the incentives for hostile takeovers. This has potentially significant regulatory implications. An illustrative example showcases the potential relevance of CPO as a defence against hostile takeovers across different industries.

Suggested Citation

  • Jean‐Philippe Serbera & John Fry, 2019. "Takeover deterrents and cross partial ownership: The case of golden shares," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 40(3), pages 243-250, April.
    • Handle: RePEc:wly:mgtdec:v:40:y:2019:i:3:p:243-250
    DOI: 10.1002/mde.2998
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