FIN-02-009 |
NYU Stern School of Business |
October 2002
Yakov Amihud, Marcel Kahan, and Rangarajan Sundaram
ABSTRACT
We provide an economic basis for permitting freezeouts of non-tendering shareholders following
successful takeovers. Our specific freezeout mechanism is based on easily verifiable in-formation,
making it implementable. This mechanism induces desirable efficiency and welfare
properties in models of corporations with widely-dispersed shareholdings (as in Grossman and
Hart, 1980) or large pivotal shareholders (as in Bagnoli and Lipman, 1988), and it strictly domi-nates
some previous proposed solutions. We analyze the case of takeover premia that arise from
competition among raiders and the implications for efficiency. Finally, introducing freezeouts in
other takeovers models makes previously identified inefficiencies vanish. Our mechanism is closely
related to the practice of takeover law in the US, which makes our analysis provide the economic
foundations of the current regulations.
Yakov Amihud
Institution: Stern School of Business, New York University, 44th West 4th Street, New York, NY 10012
Email: yamihud@stern.nyu.edu
Telephone: (212) 998-0720
Fax: (212) 995-4220
Homepage: http://www.stern.nyu.edu/~yamihud/
Marcel Kahan
Institution: School of Law, New York University, New York, NY 10012
Email: kahanm@juris.law.nyu.edu
Rangarajan K. Sundaram
Institution: Stern School of Business, New York University, 44th West 4th Street, New York, NY 10012
Telephone: (212) 998-0308
Fax: (212) 995-4233
Email: rsundara@stern.nyu.edu
Homepage:http://www.stern.nyu.edu/~rsundara
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