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Journal of Corporate Finance Vol. 15 No. 1 2009

Ownership structure and target returns

Scott W. Bauguess1,2,3; Sara B. Moeller4; Frederik P. Schlingemann5,4; Chad J. Zutter4

1 United States Securities and Exchange Commission · 2 Texas Tech University · 3 The University of Texas at Austin · 4 University of Pittsburgh · 5 Erasmus University Rotterdam

open access

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.

DOI
10.1016/j.jcorpfin.2008.09.002
Volume
15
Issue
1
Pages
48-65
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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