Takeovers, Restructuring, and the Market for Corporate Control

Ownership structure: Does it matter in takeovers?§That has been the central focus of this book. This§study investigates the effects of the ownership§structure of target firms on the returns to§shareholders of bidding and target firms in corporate§takeovers. §Grossman and Hart introduced the free-rider problem§in takeovers and showed that atomistic target§shareholders will take all the post-takeover§value-improvements of the bidder when the bidder§cannot dilute minority shareholders of the target§firm. Bagnoli and Lipman, and Shleifer and Vishny§argued that if target shareholders are pivotal§respectively have toeholds, the bidder can overcome§the free-rider problem.§We describe the microeconomic structure of the§takeover market and analyze the supply and demand§factors. The supply side of the takeover market is§determined by target shareholdings. The demand side§is determined by the initial shareholdings of the§bidder and competition between bidders. In our§empirical study, we find empirical evidence for the§relationship between the degree of ownership§concentration in target firms and the returns to§shareholders of bidding and target firms.