The manner in which hostile takeovers have historically been executed has just begun
to receive serious academic attention. Similarly, while the literature on the accuracy and determinants of share prices is voluminous, there has been little systematic historical analysis of when and how modern standards of share price efficiency took shape.
This article addresses both subjects in depth to ascertain the extent to which developments in the market for corporate control may have been associated with, or facilitated by, developments in stock market efficiency. We identify potential linkages between hostile control transactions and stock market pricing and explore these linkages empirically with a new hand-collected dataset of control contests occurring between 1900 and 1965. We show that while the evolution of acquiror tactics in control contests was plausibly linked in some circumstances to changes affecting the manner in which shares were priced other factors have to be taken into account to explain how the market for corporate control developed over this period.
Preemptive rights can prevent cheap-issuance tunneling by a controller when outside investors know that the offered securities are cheap. But when outsiders cannot tell whether the securities are cheap or overpriced, preemptive rights fail to...Read more
Although controlling shareholder agency problems have been well studied so far, many questions still remain unanswered. In particular, an important puzzle in “bad-law” jurisdictions is: why some controlling shareholders (“roving controllers”)...Read more
We derive a measure that captures the extent to which overlapping ownership structures shift managers’ incentives to internalize externalities. A key feature of the measure is that it allows for the possibility that not all investors are...Read more
This paper is the introductory chapter of Luca Enriques and Tobias Tröger (eds.), The Law and Finance of Related Party Transactions (Cambridge University Press: forthcoming). Its goal is to sketch out the individual chapters’ contributions to the...Read more