References (35)





Security-Voting Structure and Bidder Screening

Christian At

Université de Franche-Comté - CRESE

Mike Burkart

Swedish House of Finance

Samuel Lee

New York University (NYU) - Leonard N. Stern School of Business; European Corporate Governance Institute (ECGI)

December 10, 2009

Journal of Financial Intermediation, Forthcoming

This paper demonstrates that non-voting shares can promote takeovers. When the bidder has private information, shareholders may refuse to tender because they suspect to sell at an ex post unfavourable price. The ensuing friction in the sale of cash flow rights can prevent an efficient change of control. Separating cash flow and voting rights alters the degree of cross-subsidization among bidder types. It can therefore be used as an instrument to promote takeover activity and to discriminate between efficient and inefficient bidders. The optimal fraction of non-voting shares decreases with managerial ability, implying an inverse relationship between firm value and non-voting shares.

Keywords: Tender offers, free-rider problem, one share - one vote

JEL Classification: G32, G34

working papers series

Not Available For Download

Date posted: February 20, 2007 ; Last revised: October 13, 2010

Suggested Citation

At, Christian and Burkart, Mike and Lee, Samuel, Security-Voting Structure and Bidder Screening (December 10, 2009). Journal of Financial Intermediation, Forthcoming. Available at SSRN: http://ssrn.com/abstract=962137

Contact Information

Christian At
Université de Franche-Comté - CRESE ( email )
1 rue Claude Goudimel
25030 Besancon cedex, DOUBS 25000
Mike C. Burkart (Contact Author)
Swedish House of Finance ( email )
Drottninggatan 98
111 60 Stockholm

Samuel Lee
New York University (NYU) - Leonard N. Stern School of Business ( email )
44 West 4th Street
New York, NY NY 10012
United States
European Corporate Governance Institute (ECGI) ( email )
B-1050 Brussels
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