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Takeover law to protect shareholders: Increasing efficiency or merely redistributing gains?

Wang, Ying and Lahr, Henry (2017). Takeover law to protect shareholders: Increasing efficiency or merely redistributing gains? Journal of Corporate Finance, 43 pp. 288–315.

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DOI (Digital Object Identifier) Link: https://doi.org/10.1016/j.jcorpfin.2017.01.007
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Abstract

We construct a dynamic takeover law index using hand-collected data on legal provisions and empirically examine the effect of takeover regulation to protect shareholders on shareholder wealth for bidders and targets in a multi-country setting. We find that a stricter takeover law increases the wealth gains to the shareholders of the combined bidder and target firm, which suggests that stronger shareholder protection in the takeover bid process increases the efficiency of the takeover market. In contrast to our hypothesis, results show that stricter takeover law does not hurt bidders. Its effect on target announcement returns is significantly positive and economically large. Our findings on individual provisions suggest that the mandatory bid rule and ownership disclosure increase overall synergistic gains in takeovers, whilst the fair-price rule and squeeze-out rights may reduce them. Further results show that stricter takeover regulation increases competition in the market for corporate control and reduces the time to successful completion of a takeover bid, which explains increased combined wealth gains under stricter takeover regulation.

Item Type: Journal Item
Copyright Holders: 2017 Elsevier B.V.
ISSN: 0929-1199
Keywords: takeover laws; mergers and acquisitions; shareholder protection; announcement returns; EU Takeover Directive
Academic Unit/School: Faculty of Business and Law (FBL) > Business > Department for Accounting and Finance
Faculty of Business and Law (FBL) > Business
Faculty of Business and Law (FBL)
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Item ID: 48394
Depositing User: Henry Lahr
Date Deposited: 06 Feb 2017 13:53
Last Modified: 04 Jun 2019 14:05
URI: http://oro.open.ac.uk/id/eprint/48394
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