The Foundations of Freezeout Laws in Takeovers

32 Pages Posted: 4 Nov 2008

See all articles by Yakov Amihud

Yakov Amihud

New York University - Stern School of Business

Marcel Kahan

New York University School of Law; European Corporate Governance Institute

Rangarajan K. Sundaram

New York University (NYU) - Department of Finance

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Date Written: August 2003

Abstract

We provide an economic basis for permitting freezeouts of non-tendering shareholdersfollowing successful takeovers. We describe a specific freezeout mechanism based on easily verifiable information that induces desirable efficiency and welfareproperties in models of both corporations with widely dispersed shareholdings andcorporations with large pivotal shareholders. The mechanism dominates previous proposals along some important dimensions. We also examine takeover premia that arise in the presence of competition among raiders. Our mechanism is closely related to the practice of takeover law in the U.S.; thus, our analysis may be thought of as analyzing the economic foundations of current regulations.

Suggested Citation

Amihud, Yakov and Kahan, Marcel and Sundaram, Rangarajan K., The Foundations of Freezeout Laws in Takeovers (August 2003). NYU Working Paper No. S-CG-02-04. Available at SSRN: https://ssrn.com/abstract=1295262

Yakov Amihud (Contact Author)

New York University - Stern School of Business ( email )

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Marcel Kahan

New York University School of Law ( email )

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European Corporate Governance Institute ( email )

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Rangarajan K. Sundaram

New York University (NYU) - Department of Finance ( email )

Stern School of Business
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New York, NY 10012-1126
United States
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212-995-4233 (Fax)

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