Is There a Market for Partial Corporate Control? Evidence from REITs

29 Pages Posted: 16 Oct 2007

See all articles by Susanne E. Cannon

Susanne E. Cannon

DePaul University Department of Real Estate

Rebel A. Cole

Florida Atlantic University

Jonathan F. Dombrow

DePaul University - Department of Finance

Date Written: March 31, 2006

Abstract

In October of 2002, the Simon Property Group made a hostile takeover bid for Taubman Centers, a bid that the financial press widely reported as the first significant hostile takeover attempt in the U.S. REIT industry. As such, this event provides a natural experiment for estimating the value of the market for corporate control, one of the primary corporate governance mechanisms by which the market ensures that firm managers maximize shareholder value. Contrary to our expectations, we find no significant industry price reaction in response to this announcement, strong evidence that this event did not mark the introduction of a market for corporate control into the REIT industry. We argue that REIT anti-takeover provisions had doomed Simon's bid from the start and continue to preclude operation of a market for corporate control. However, we do find that Taubman's shares responded favorably to the announcement, rising by 12 percent on the announcement day. We attribute this to operation of the market for partial corporate control as described by Bethel, Leibeskind and Opler (1998).

Keywords: anti-takeover provision, corporate control, hostile takeover, partial corporate control, REIT

JEL Classification: G34, G38, R33

Suggested Citation

Cannon, Susanne E. and Cole, Rebel A. and Dombrow, Jonathan F., Is There a Market for Partial Corporate Control? Evidence from REITs (March 31, 2006). Available at SSRN: https://ssrn.com/abstract=1020169 or http://dx.doi.org/10.2139/ssrn.1020169

Susanne E. Cannon

DePaul University Department of Real Estate ( email )

1 East Jackson Blvd.
Chicago, IL 60604-2287
United States

Rebel A. Cole (Contact Author)

Florida Atlantic University ( email )

College of Business
777 Glades Road
Boca Raton, FL 33431
United States
1-561-297-4969 (Phone)

HOME PAGE: http://rebelcole.com

Jonathan F. Dombrow

DePaul University - Department of Finance ( email )

1 East Jackson Blvd.
Chicago, IL 60604-2287
United States

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