English, Article, Journal or magazine article edition: Blockholder Identity, Equity Ownership Structures and Hostile Takeovers Gary Gorton; Matthias Kahl

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Bookmark: http://trove.nla.gov.au/version/190484
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Blockholder Identity, Equity Ownership Structures, and Hostile Takeovers
Author
  • Gary Gorton
  • Matthias Kahl
Physical Description
  • preprint
Notes
  • We determine firms' equity ownership structures and provide a theory of hostile takeovers by distinguishing the roles of two types of blockholders: rich investors and institutional investors. We also distinguish the roles of two types of stock markets: the block market and the market with small investors. Rich investors have their own money at stake while institutional investors are run by proffessional managers and hence face agency conflicts. Because rich investors face no agency problems they are better at monitoring managers. If their wealth is insufficient to control all corporations, then "agency-cost free" capital is scarce. We investigate the allocation of this scarce resource. A hostile takeover is the consequence of a state-contingent allocation of agency-cost free capital. We show that only rich investors engage in hostile takeovers. Institutional investors instead are either permanent blockholding monitors or facilitate takeovers by selling blocks to rich investors. Even though all firms are ex ante identical, some may rely on the takeover mechanism while others rely on permanent institutional monitoring. We characterize the ownership structure of firms showing, in particular, that (ex ante) identical firms can have different ownership structures. Some can have initially dispersed ownership while others have an institutional blockholder.
  • RePEc:wop:pennin:99-19
  • RePEc:nbr:nberwo:7123
Language
  • English
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