Takeover Defenses and Ipo Firm Value in the Netherlands

51 Pages Posted: 26 Aug 2006

See all articles by Tjalling van der Goot

Tjalling van der Goot

University of Amsterdam

Peter Roosenboom

Rotterdam School of Management, Erasmus University; Erasmus Research Institute of Management (ERIM)

Date Written: 19 2003 6,

Abstract

The central question of this study involves the relation between the use of takeover defenses and IPO firm value. We report that management frequently uses takeover defenses before taking the firm public. The use of takeover defenses is primarily motivated by managerial entrenchment. IPO investors anticipate potential conflict of interests with management and reduce the price they pay for the IPO shares if takeover defenses are adopted. Although managers internalize this cost of takeover defenses to the degree they own pre-IPO stock, they are likely to gain through private control benefits. Non-management pre-IPO owners lose. Their shares are worth less, but different from managers, they do not get offsetting private control benefits. We infer that managers use takeover defenses to protect private control benefits at non-management pre-IPO owners&apos' expense.

Keywords: initial public offering, takeover defense, firm valuation

JEL Classification: M, M41, G3, G34, G12

Suggested Citation

van der Goot, Tjalling and Roosenboom, Peter, Takeover Defenses and Ipo Firm Value in the Netherlands (19 2003 6,). ERIM Report Series Reference No. ERS-2003-049-ORG, Available at SSRN: https://ssrn.com/abstract=423660

Tjalling Van der Goot

University of Amsterdam ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+31 20 525 4171 (Phone)

Peter Roosenboom (Contact Author)

Rotterdam School of Management, Erasmus University ( email )

P.O. Box 1738
Room T09-56
3000 DR Rotterdam
Netherlands
+31 10 40 82255 (Phone)

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

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