Econometrica: Jan, 2016, Volume 84, Issue 1

Information in Tender Offers with a Large Shareholder

https://doi.org/10.3982/ECTA11059
p. 87-139

Mehmet Ekmekci, Nenad Kos

We study takeovers of firms whose ownership structure is a mixture of minority block‐holders and small shareholders. We show that the combination of dispersed private information on the side of small shareholders and the presence of a large shareholder can facilitate profitable takeovers. Furthermore, our analysis implies that even if some model of takeovers predicts a profit for the raider, for example, due to private benefits, the profit will be underestimated unless the large shareholder and the dispersion of information among the small shareholders are modeled.