Passive Shareholders as a Takeover Defense

47 Pages Posted: 2 Feb 2011 Last revised: 16 Mar 2011

Andriy Bodnaruk

University of Illinois at Chicago

Pengjie Gao

University of Notre Dame - Mendoza College of Business

Per Östberg

University of Zurich - Department of Banking and Finance; Swiss Finance Institute

Hayong Yun

Michigan State University - Department of Finance

Date Written: February 23, 2011

Abstract

This paper evaluates the effect of shareholder passiveness on the market for corporate control. We find that firms with more passive shareholders (lower ownership per non-institutional shareholder) are less likely to be takeover targets, less likely to be acquired and command higher premiums. Using the adoption of anti-takeover law in Delaware as an exogenous shock to anti-takeover protection, we show that the passiveness of shareholder base decreases as the takeover threat subsides. Our findings support the idea that a passive shareholder base is a substitute for other takeover defenses.

Keywords: Mergers and Acquisitions, Ownership Structure and Corporate Governance

JEL Classification: G34, G32

Suggested Citation

Bodnaruk, Andriy and Gao, Pengjie and Östberg, Per and Yun, Hayong, Passive Shareholders as a Takeover Defense (February 23, 2011). Swiss Finance Institute Research Paper No. 10-56. Available at SSRN: https://ssrn.com/abstract=1730265 or http://dx.doi.org/10.2139/ssrn.1730265

Andriy Bodnaruk (Contact Author)

University of Illinois at Chicago ( email )

1200 W Harrison St
Chicago, IL 60607
United States

Pengjie Gao

University of Notre Dame - Mendoza College of Business ( email )

246 Mendoza College of Business
Notre Dame, IN 46556-5646
United States
(574) 631-8048 (Phone)

Per Östberg

University of Zurich - Department of Banking and Finance ( email )

Plattenstrasse 14
CH-8032 Zurich, Zurich 8032
Switzerland
+41 44 6342956 (Phone)

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Hayong Yun

Michigan State University - Department of Finance ( email )

645 N Shaw Lane, Room 339
East Lansing, MI 48824-1122
United States
517-884-0549 (Phone)

HOME PAGE: http://https://sites.google.com/site/hayongy/

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