Reservation Prices in Shareholders’ Response to Freeze-Out Tender Offers

28 Pages Posted: 17 Dec 2019

See all articles by Assaf Hamdani

Assaf Hamdani

Tel Aviv University; Buchman Faculty of Law; Coller School of Management; European Corporate Governance Institute (ECGI)

Beni Lauterbach

Bar-Ilan University - Graduate School of Business Administration; European Corporate Governance Institute (ECGI)

Yevgeny Mugerman

Bar Ilan University

Date Written: December 1, 2019

Abstract

We employ a sample of 201 freeze-out tender offers (offers of controlling shareholders to buy all public shares) in Israel to examine how investors’ decision (to accept or reject the offer) is influenced by alternative reference prices, some of which are commonly specified in freeze-out offers. Our findings reveal that average purchase price is the key reservation price - when freeze-out offer price exceeds our novel estimate of the minority shareholders’ average purchase price of the shares, offer acceptance probability increases significantly. Thus, purchase price appears as a more fundamental behavioral anchor than its main competitor - the past 52-weeks high.

Keywords: freeze-out transactions, reference points, loss aversion

JEL Classification: G02, G31, G34

Suggested Citation

Hamdani, Assaf and Lauterbach, Beni and Mugerman, Yevgeny, Reservation Prices in Shareholders’ Response to Freeze-Out Tender Offers (December 1, 2019). Available at SSRN: https://ssrn.com/abstract=3496194 or http://dx.doi.org/10.2139/ssrn.3496194

Assaf Hamdani

Tel Aviv University; Buchman Faculty of Law; Coller School of Management ( email )

Ramat Aviv
Tel Aviv, 69978
Israel

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Beni Lauterbach (Contact Author)

Bar-Ilan University - Graduate School of Business Administration ( email )

Ramat Gan
Israel

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Yevgeny Mugerman

Bar Ilan University ( email )

Ramat Gan
5290002
Israel

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