Does the Mandatory Bid Rule Add Value to Target Shareholders?

Financial Management, Volume 48, Issue 3, Fall 2019, Pages 739-771

43 Pages Posted: 23 Feb 2014 Last revised: 12 Jun 2023

See all articles by Sapnoti Eswar

Sapnoti Eswar

School of Economics and Finance, University of St Andrews

Date Written: May 8, 2018

Abstract

I investigate whether implementation of the mandatory bid rule – the rule that grants all shareholders the right to participate in a takeover transaction at equal terms – affects target announcement returns. I use a difference-in-differences approach and the staggered adoption of the rule across 15 European countries. I find that the rule change leads to higher target returns. In full transactions, better accounting standards and share-holder protection norms of the acquirer leads to higher target returns. In majority transactions, greater value transfer from acquirers with weak accounting standards leads to higher target returns. I find weak evidence of overpayment by acquirers.

Keywords: mandatory bid rule, takeover regulation, accounting standards, shareholder protection

JEL Classification: G32, G34, G38

Suggested Citation

Eswar, Sapnoti, Does the Mandatory Bid Rule Add Value to Target Shareholders? (May 8, 2018). Financial Management, Volume 48, Issue 3, Fall 2019, Pages 739-771, Available at SSRN: https://ssrn.com/abstract=2399484 or http://dx.doi.org/10.2139/ssrn.2399484

Sapnoti Eswar (Contact Author)

School of Economics and Finance, University of St Andrews ( email )

Castle Cliff
St Andrews
St Andrews, KY16 9AR
United Kingdom

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
206
Abstract Views
1,599
Rank
270,533
PlumX Metrics