Governance of Corporate Takeovers:

• Autores: Joseph Vithayathil, Vidyanand Choudhary
• Localización: MIS Quarterly, ISSN 0276-7783, ISSN-e 2162-9730, Vol. 42, Nº. 1, 2018, págs. 45-62
• Idioma: inglés
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• Resumen

  • We study the potential for digital, online information and electronic voting to improve shareholder surplus by facilitating a new governance structure, owner-governance, which shifts control of the takeover decision from the board to shareholders. We compare analytical models of owner-governance to the current practice of delegated-governance in the context of increasing availability of online information, which increases public informedness. Our analysis shows that shareholders of the target firm and the acquirer both prefer owner-governance to delegated-governance when informedness is sufficiently high. Interestingly, we find a region where owner-governance offers a higher probability of takeover but delegated-governance offers higher shareholder surplus. Under delegated-governance, the board endogenously sets an entrenchment level that is always greater than the entrenchment level preferred by the shareholders and increasing informedness reduces the probability of a takeover. Our results suggest that owner-governance should be considered because of increasing informedness.