Partial Acquisitions and Dilution of Minority Shareholders' Wealth

30 Pages Posted: 1 Mar 2002

See all articles by Patricia Charlety

Patricia Charlety

ESSEC Business School - Finance Department

Marie-Cécile Fagart

University of Rouen and CREST-LEI

Said Souam

University de Tours and CREST-LEI

Date Written: February 15, 2002

Abstract

We study horizontal partial ownership arrangements in an oligopolistic industry in the absence of synergies. Contrary to existing results, we find that a dominant shareholder may choose to acquire shares in a competitor although the aggregate profit of the two firms is reduced. This is due to a favoritism effect: after the acquisition, the dominant shareholder will favor the firm in which he holds the relatively higher share to the detriment of shareholders of the other firm. This dilution of property rights is reflected in the value of shares when the acquisition is launched, which explains its private profitability for the dominant shareholder.

Keywords: Horizontal partial acquisitions, favoritism, dominant shareholder, minority shareholders

JEL Classification: D23, G32, G34, L13

Suggested Citation

Charléty-Lepers, Patricia and Fagart, Marie-Cécile and Souam, Said, Partial Acquisitions and Dilution of Minority Shareholders' Wealth (February 15, 2002). Available at SSRN: https://ssrn.com/abstract=301385 or http://dx.doi.org/10.2139/ssrn.301385

Patricia Charléty-Lepers (Contact Author)

ESSEC Business School - Finance Department ( email )

Avenue Bernard Hirsch
BP 105 Cergy Cedex, 95021
France

Marie-Cécile Fagart

University of Rouen and CREST-LEI ( email )

1, rue Thomas Becket
76821 Mont Saint Aignan Cedex 28 rue des Saints-Peres
Rouen
France
00 331 44 58 27 66 (Phone)

Said Souam

University de Tours and CREST-LEI ( email )

Parc de Grandmont
28 rue des Saints-Peres
F-37200 Tours
France
00 331 44 58 27 46 (Phone)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
309
Abstract Views
1,694
Rank
184,730
PlumX Metrics