The Origins of the Market for Corporate Control

52 Pages Posted: 13 Sep 2013 Last revised: 9 Oct 2015

See all articles by John Armour

John Armour

University of Oxford - Faculty of Law; University of Oxford - Said Business School; European Corporate Governance Institute (ECGI)

Brian R. Cheffins

University of Cambridge - Faculty of Law; European Corporate Governance Institute (ECGI)

Date Written: September 11, 2013

Abstract

This paper, which was prepared for a University of Illinois College of Law symposium honoring Prof. Larry Ribstein, examines the origins of the market for corporate control in the United States. The standard historical narrative is that the market for corporate control took on its modern form in the mid-1950s with the emergence of the cash tender offer. Using hand-collected data from newspaper reports, we show that there in fact were numerous instances during the opening decade of the 20th century where a bidder sought to obtain voting control by purchasing shares on the stock market. Moreover, share-for-share exchange tender offers were used to make takeover bids as early as 1901, and cash tender offers can be traced back to at least the mid-1940s. We argue that the way in which cash tender offers came to dominate the market for control after World War II can be explained primarily by changes in the pattern of share ownership and of the opportunities bidders had for "managing" the stock price of intended targets.

Keywords: Takeovers, US corporate law, history, tender offers

JEL Classification: G34, K22, L92, N21, N22

Suggested Citation

Armour, John and Cheffins, Brian R., The Origins of the Market for Corporate Control (September 11, 2013). ECGI - Law Working Paper No. 226/2013. Available at SSRN: https://ssrn.com/abstract=2324427 or http://dx.doi.org/10.2139/ssrn.2324427

John Armour (Contact Author)

University of Oxford - Faculty of Law ( email )

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HOME PAGE: http://www.law.ox.ac.uk/people/john-armour

University of Oxford - Said Business School ( email )

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Great Britain

HOME PAGE: http://www.sbs.ox.ac.uk/about-us/people/john-armour

European Corporate Governance Institute (ECGI) ( email )

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Belgium

HOME PAGE: http://www.ecgi.org

Brian R. Cheffins

University of Cambridge - Faculty of Law ( email )

10 West Road
Cambridge, CB3 9DZ
United Kingdom
+44 1223 330084 (Phone)
+44 1223 330055 (Fax)

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

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