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Ownership Structure and Target Returns

47 Pages Posted: 12 Nov 2006 Last revised: 19 Nov 2011

Scott W. Bauguess

US Securities & Exchange Commission

Sara B. Moeller

University of Pittsburgh - Finance Group

Frederik P. Schlingemann

University of Pittsburgh - Finance Group; Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM)

Chad J. Zutter

University of Pittsburgh - Finance Group

Date Written: December 1, 2007

Abstract

Contrary to past literature, active ownership, defined as all officers and directors of the target firm, has no association with target returns. Rather, we find that inside (managerial) ownership has a positive relation with target returns, whereas active-outside (non-managing director) ownership has a negative relation with target returns. The relation between inside ownership and target returns is best explained by takeover anticipation, whereas the relation between outside ownership and target returns is best explained by outsiders' willingness to share gains with the bidder. While the relation between target returns and ownership measures is generally more pronounced for non-tender deals, it is more pronounced for tender offers between active corporate ownership and target returns.

Keywords: target returns, ownerhsip, acquisition, firm value

JEL Classification: G31, G32, G34

Suggested Citation

Bauguess, Scott W. and Moeller, Sara B. and Schlingemann, Frederik P. and Zutter, Chad J., Ownership Structure and Target Returns (December 1, 2007). Journal of Corporate Finance, Vol. 15, No. 1, 2009. Available at SSRN: https://ssrn.com/abstract=943998

Scott Bauguess

US Securities & Exchange Commission ( email )

100 F Street, NE
Washington, DC 20549
United States
(202) 551-6660 (Phone)

Sara Moeller (Contact Author)

University of Pittsburgh - Finance Group ( email )

372 Mervis Hall
Pittsburgh, PA 15260
United States

Frederik Schlingemann

University of Pittsburgh - Finance Group ( email )

372 Mervis Hall
Pittsburgh, PA 15260
United States
(412) 648 1847 (Phone)
(412) 648 1693 (Fax)

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam, 3000 DR
Netherlands

Chad Zutter

University of Pittsburgh - Finance Group ( email )

352 Mervis Hall, Katz GSOB
University of Pittsburgh
Pittsburgh, PA 15260
United States
412-648-2159 (Phone)
412-648-1693 (Fax)

HOME PAGE: http://www.pitt.edu/~czutter/

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