The Effects of Management Involvement on Takeover Competition and Shareholder Returns
University of Nevada, Las Vegas - Department of Finance
University of Wyoming - College of Business - Department of Economics and Finance
March 25, 2011
Using a sample of going-private buyouts, we examine how target management involvement on the bidding side impacts takeover competition and target shareholder returns. We find that when target management are involved, fewer potential bidders are contacted and fewer private bids are received in the pre-public takeover phase. Management involvement however does not appear to adversely affect target announcement period returns for both auction and negotiated deals. This is consistent with an optimal selling strategy by targets even when management is involved. We show that the likelihood of shareholder lawsuits is higher when management is involved and this appears to play an important role in ensuring fair target premiums.
Number of Pages in PDF File: 48
Keywords: going private, management involvement
JEL Classification: G34working papers series
Date posted: March 29, 2010 ; Last revised: March 27, 2011
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