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TAKEOVER RIGHTS AND THE VALUE OF RESTRICTED SHARES
Author(s) -
Maynes Elizabeth
Publication year - 1996
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.1996.tb00591.x
Subject(s) - shares outstanding , short interest ratio , stock dilution , voting , equity (law) , market share , tender offer , business , monetary economics , common stock , value (mathematics) , cash , economics , shareholder , corporate governance , finance , restricted stock , stock market , law , paleontology , context (archaeology) , horse , machine learning , biology , politics , political science , computer science
The premium paid for superior voting shares relative to restricted shares in dual‐class equity firms is well documented but not fully explained. In this paper, evidence that the premium reflects the expectation of higher cash flows in takeovers for superior shares is found by examining regulatory actions that changed the right of restricted shares to participate in takeovers. The extension of takeover rights to restricted shares resulted in a significant decline in the premium for superior shares, and the retraction of takeover rights had the reverse effect. This supports the hypothesis that the market expected the restricted shares to be treated less favorably in takeovers.