Expropriation vs. Proportional Sharing in Corporate Acquisitions

51 Pages Posted: 20 May 2004  

Mara Faccio

Purdue University - Krannert School of Management; University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER)

David Stolin

Toulouse Business School - Economics and Finance

Multiple version iconThere are 2 versions of this paper

Date Written: May 2004

Abstract

An important and growing literature in finance points to existence of considerable benefits to being a controlling shareholder, especially when legal protection of minority shareholders is weak, and when separation of ownership from control is high. At the same time, the substantial and well established literature on mergers often finds these key corporate events to be subject to agency costs. Relying on these two arguments, we employ a novel application of the Bertrand et al. (2002) insight to study the hypothesis that controlling shareholders use acquisitions to expropriate resources to their benefit. The findings do not allow us to reject the null hypothesis of proportional sharing of acquisition gains in favor of the alternative hypothesis of expropriation of bidder's minority shareholders.

Keywords: M&As, expropriation, controlling shareholder

JEL Classification: G3, G34

Suggested Citation

Faccio, Mara and Stolin, David, Expropriation vs. Proportional Sharing in Corporate Acquisitions (May 2004). Available at SSRN: https://ssrn.com/abstract=547742 or http://dx.doi.org/10.2139/ssrn.547742

Mara Faccio (Contact Author)

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI)

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

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

National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER) ( email )

BIZ 2 Storey 4, 04-05
1 Business Link
Singapore, 117592
Singapore

David Stolin

Toulouse Business School - Economics and Finance ( email )

20, bd Lascrosses - BP 7010
Toulouse Cedex 7, 31068
France

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