Premium
TARGET‐MANAGEMENT‐INVOLVED BUYOUTS: IMPACT ON TAKEOVER COMPETITION, LITIGATION RISK, AND SHAREHOLDER RETURNS
Author(s) -
Gogineni Sridhar,
Puthenpurackal John
Publication year - 2014
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/jfir.12039
Subject(s) - shareholder , business , competition (biology) , sample (material) , monetary economics , litigation risk analysis , large sample , accounting , finance , economics , corporate governance , ecology , chemistry , statistics , audit , mathematics , chromatography , biology
We examine the impact of target management involvement as bidders in a sample of completed going‐private buyouts. Announcement‐period and long‐run target shareholder returns do not appear to be lower in management‐involved deals. We attempt to identify disciplining mechanisms in the takeover process that can explain this result. We find that target shareholder lawsuits are more likely when management is involved, and litigation risk appears to positively affect target returns. We also study a sample of withdrawn buyout deals and find that a significant number of management bids are unsuccessful, further suggesting that safeguards exist in management‐involved deals.