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Equal opportunity rule vs. market rule in transfer of control: How can private benefits help to provide an answer?

Listed author(s):
  • Hubert De La Bruslerie

    ()

    (DRM - Dauphine Recherches en Management - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique)

Registered author(s):

    Having been introduced in the European Union and in many other countries, the equal opportunity rule is seen as protecting investors in the event of a transfer of control. This rule should be analyzed in a context of appropriation of private benefits between the new controlling shareholders and the outside investors. Both parties need to design a new implicit contract to share the firm's ownership. Using a signaling model, we show that the new controlling shareholder issues signals to outside shareholders to deliver private information on a firm's future economic return and her private rate of appropriation. The ownership stake of the controlling shareholder and the premium embedded in the acquisition price are key parameters. In a controlling ownership system, the equal opportunity rule modifies the relative behavior of controlling and outside shareholders. The quality of information deteriorates but the discipline on appropriation may become stronger

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    File URL: https://halshs.archives-ouvertes.fr/halshs-00937543/document
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    Paper provided by HAL in its series Post-Print with number halshs-00937543.

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    Date of creation: 2013
    Publication status: Published in Journal of Corporate Finance, Elsevier, 2013, 23, pp.88-107. <10.1016/j.jcorpfin.2013.07.007>
    Handle: RePEc:hal:journl:halshs-00937543
    DOI: 10.1016/j.jcorpfin.2013.07.007
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00937543
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