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Type: Conference paper
Title: Pre-bid acquisitions of target stock and management-controlled equity
Author: Canil, J.
Rosser, B.
Citation: Proceedings of EFMA 2006 Annual Conference, 2006 / Pellon, J.M. (ed./s), pp.www1-www24
Part of: Proceedings of 15th Annual Meeting of the European Financial Management Association
Publisher: EFMA
Publisher Place: www
Issue Date: 2006
Conference Name: EFMA Annual Conference (28 Jun 2006 : Madrid)
Statement of
Jean M. Canil and Bruce A. Rosser
Abstract: This paper addresses the question of how target manager entrenchment impacts on bidders’ initial takeover strategy, which comprises the toehold and the initial bid premium decisions, modeled as conjoint. We document several empirical regularities. The first is that the toehold alone has no explanatory power in explaining bidders’ takeover strategy. The second finding is that a cost savings construct internalizing the toehold and premium choices satisfactorily identifies the drivers of initial takeover strategies. Since our measure of cost savings is a direct measure of free rider cost savings, our conclusion is that free rider costs drive toehold and initial bid premium choices. Third, we show empirically that toeholder cost savings are increasing in the target management block after controlling for likely determinants of the toehold/principal outsider decision. Hence, free rider cost savings are higher for owner mangers than entrenched managers.
Keywords: takeovers, toehold, entrenchment, strategy
RMID: 0020062719
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Appears in Collections:Business School publications

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