Ownership structure and target returns |
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| Authors: | Scott W Bauguess Sara B Moeller Frederik P Schlingemann Chad J Zutter |
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| Institution: | 1. Università Cattolica del Sacro Cuore, Milan, Italy;2. Surrey Business School, University of Surrey, Guildford, UK;1. Finance group, D''Amore-McKim School of Business, Northeastern University, Boston, 02115, MA, USA;2. Finance area, Kenan-Flagler Business School, University of North Carolina, Chapel Hill, 27599, NC, USA;1. College of Business Administration, University of Illinois at Chicago, 2431 UH MC 168, Chicago, IL 60607, United States;2. Mays Business School, Texas A&M University, 360 Wehner Building MS 4218, College Station, TX 77843, United States |
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| Abstract: | Contrary to past literature, ownership defined as “all officers and directors” of the target firm has no association with target returns. Rather, we find that inside (managerial) ownership has a positive relation with target returns, whereas active-outside (non-managing director) ownership has a negative relation with target returns. Using accounting-based versus market-based performance measures, we find that the relation between inside ownership and target returns is best explained by takeover anticipation. Using bidder and synergy returns we find that the relation between outside ownership and target returns is best explained by outsiders' willingness to share gains with the bidder. While the relations are more pronounced for non-tender deals, they also hold for tender offers when active-outside ownership is corporate rather than institutional. |
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