Determinants of the Choice of the Hostile Takeover Mechanism: An Empirical Analysis of Tender Offers and Proxy Contests

Sridharan, Uma V.; Reinganum, Marc R.

doi:10.2307/3665877

Cited by 12 publications

(7 citation statements)

References 41 publications

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“…16. Sridharan and Reinganum (1995) find that firms with poor financial performance are more likely to be subject to proxy contests than to tender offers-a finding that is consistent in our model with the view that dissidents may use the proxy process to invite the scrutiny of institutional investors and rely on their information to implement a better policy.…”

Section: Passive Shareholder Information and Voting Behaviorsupporting

confidence: 83%

“…Jarrell and Bradley (1980) find that takeover premia in tender offers increased after the Williams Act of 1968, which is regarded as having increased takeover costs. Sridharan and Reinganum (1995) find evidence that the probability of proxy contests increases as the firm becomes more insider-dominated. This is consistent with the view that in these situations, institutions are more vigilant and better informed (higher ), leading to higher probability of proxy contests.…”

mentioning

confidence: 89%

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Tender Offers, Proxy Contests, and Large‐Shareholder Activism

Dasgupta¹,

Nanda²

1997

Economics Manag Strategy

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The paper analyzes tender offers and proxy contests as alternative means of resolving corporate governance conflicts between dissidents and incumbent management. We show that when a dissident shareholder is sufficiently confident about the potential benefits from changing corporate policy, he will seek majority control by making a tender offer rather than initiating a proxy contest. When the dissident is relatively uninformed, however, he may opt for a proxy contest, thereby utilizing the information of other shareholders to implement the better policy. Consistent with empirical evidence, the model predicts that announcements of tender offers will tend to be associated with larger positive stockprice reactions than announcements of proxy contests. The model is easily extended to allow for promanagement bias in proxy voting by institutional investors. Empirical observations that have been viewed as evidence of such promanagement bias are shown to be quite consistent with the absence of such bias. Policy issues are discussed as well. An interesting result is that even policies targeted at reducing the costs of conducting proxy contests may have ambiguous social consequences, given the possibility of substitution between tender offers and proxy contests.

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Section: Passive Shareholder Information and Voting Behaviorsupporting

confidence: 83%

mentioning

confidence: 89%

Tender Offers, Proxy Contests, and Large‐Shareholder Activism

Dasgupta¹,

Nanda²

1997

Economics Manag Strategy

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“…DeAngelo and DeAngelo (1989) find that the typical dissident is resource constrained. Sridharan and Reinganum (1991) find that targets of proxy contests are poorer performers, more highly leveraged (as predicted by Harris and Raviv (1988)), and more likely to be management-controlled than the corresponding targets of hostile tender offers. Finally, Mulherin and Poulsen (1992) find that proxy contests and tender offers became increasingly intertwined in the 1980s.…”

Section: Footnotesmentioning

confidence: 67%

Communication Costs, Information Acquisition, and Voting Decisions in Proxy Contests

Bhattacharya

2003

SSRN Journal

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“…There were 17 proxy contests per year during 1979 and 1994 (Mulherin and Poulson 1998) while there were 55 per year during 1994-2008(Fos 2016. The market value of target companies rose from about 221 million from 1978 to 1984 (Sridharan and Reinganum 1995) to 1,629 million from 1988 to 2008 (see Table 1). The target companies are often high profile companies such as Motorola (2007), Yahoo (2008), Target (2009), Hewlett Packard (2009), DuPont (2015 and P&G (2017).…”

Section: Introductionmentioning

confidence: 97%

The Intra-Industry Effects of Proxy Contests

Chen

Huang

2018

SSRN Journal

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This paper is the first study on the intra-industry effects of proxy contests. Using a sample of proxy contests from January 1988 through December 2008, we identify a striking cross-sectional difference in market reaction to the target companies. As much as 61% of the target firms have significant positive cumulative abnormal return (CARs) in the period (-10, +10) around the announcement day, while 39% of the target firms have the negative CARs in the same event window. Moreover, we find that the stock market reaction to the target firms' competitors is primarily driven by the target-related factors when the market reacts favorably to a proxy contest. In contrast, the stock market reaction to the competitors is mainly affected by the competitor-related factors when the market reacts unfavorably to the proxy contest. We further reveal that competitors experience a significant negative abnormal stock return when the target firms receive negative market reactions, while competitors have no significant abnormal return when the target firms receive a positive market reaction. Our findings enrich the corporate governance research by showing the impact of the target firms' corporate governance change on the firms' competitors.

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Determinants of the Choice of the Hostile Takeover Mechanism: An Empirical Analysis of Tender Offers and Proxy Contests

Cited by 12 publications

References 41 publications

Tender Offers, Proxy Contests, and Large‐Shareholder Activism

Tender Offers, Proxy Contests, and Large‐Shareholder Activism

Communication Costs, Information Acquisition, and Voting Decisions in Proxy Contests

The Intra-Industry Effects of Proxy Contests

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