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Cross-Ownership and the Takeover Deterrence

Author

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  • Nyberg, Sten

    (Research Institute of Industrial Economics (IFN))

Abstract

Firms having significant shareholdings in one another is not an unusual phenomenon in countries where the law admits such ownership arrangements, like Sweden and Japan. In this paper the role of cross-ownership as means for deterring takeovers is examined in the framework of a simple two-firm, two-period model with raiders, differing with respect to their valuation of a potential target, turning up randomly. The paper argues the following points: If cross-ownership increases managerial influence - the consequences for the shareholders depend on the probability that the firm would have received a tender offer in absence of cross-ownership and managers benefit from it up to a point but their gains are negatively related to the their ability to resist takeover attempts.

Suggested Citation

  • Nyberg, Sten, 1989. "Cross-Ownership and the Takeover Deterrence," Working Paper Series 243, Research Institute of Industrial Economics.
    • Handle: RePEc:hhs:iuiwop:0243
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    Cited by:

    1. is not listed on IDEAS
    2. Li, Zhenghui & Chen, Bin & Lu, Siting & Liao, Gaoke, 2024. "The impact of financial institutions' cross-shareholdings on risk-taking," International Review of Economics & Finance, Elsevier, vol. 92(C), pages 1526-1544.
    3. Guo, Hongling & Sun, Yue & Qiu, Xuemei, 2021. "Cross-shareholding network and corporate bond financing cost in China," The North American Journal of Economics and Finance, Elsevier, vol. 57(C).
    4. Shaoping Zhao, 1999. "Joint ventures for entry deterrence," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 20(1), pages 25-35.

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    Keywords

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    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management

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