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How Target Shareholders Benefit from Value‐Reducing Defensive Strategies in Takeovers
Author(s) -
BERKOVITCH ELAZAR,
KHANVEEN
Publication year - 1990
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1990.tb05084.x
Subject(s) - shareholder , value (mathematics) , business , stock price , stock (firearms) , microeconomics , economics , computer science , finance , corporate governance , biology , engineering , machine learning , mechanical engineering , paleontology , series (stratigraphy)
This paper shows that target shareholders can be made better off through the use of certain types of defensive strategies that reduce the value of the target by different amounts for different bidders. In many cases, simply the threat of such strategies can make target shareholders better off. Therefore, empirical tests based on stock price reactions at the adoption of defensive strategies may be underestimating the effect of such strategies. The paper also identifies the necessary characteristics that make these strategies effective and shows that many observed defenses possess similar properties.