Abstract

http://ssrn.com/abstract=962137
 


 



Security-Voting Structure and Bidder Screening


Christian At


Université de Franche-Comté - CRESE

Mike Burkart


Swedish House of Finance; Stockholm School of Economics - Department of Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); London School of Economics - Financial Markets (FMG) Group

Samuel Lee


Santa Clara University - Leavey School of Business; European Corporate Governance Institute (ECGI)

December 10, 2009

Journal of Financial Intermediation, Forthcoming

Abstract:     
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


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
France
Mike C. Burkart (Contact Author)
Stockholm School of Economics - Department of Finance ( email )
P.O. Box 6501
Sveavagen 65
SE-113 83 Stockholm
Sweden
+46 8 736 9678 (Phone)
+46 8 31 6422 (Fax)
HOME PAGE: http://www.hhs.se/Finance/People/ShowPerson.htm?personid=54
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
HOME PAGE: http://www.cepr.org/default_static.htm
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
London School of Economics - Financial Markets (FMG) Group
Houghton Street
London WC2A 2AE
United Kingdom
HOME PAGE: http://www.lse.ac.uk/collections/finance/facultyAndStaff/profiles/mikeBurkart.htm
Swedish House of Finance ( email )
Drottninggatan 98
111 60 Stockholm
Sweden

Samuel Lee
Santa Clara University - Leavey School of Business
500 El Camino Real
Santa Clara, CA California 95053
United States
European Corporate Governance Institute (ECGI) ( email )
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
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