Voting Rights, Private Benefits, and Takeovers (ICPSR 1252)

Version Date: Mar 8, 2002

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Principal Investigator(s):
Frank A. Schmid, Federal Reserve Bank of St. Louis

https://doi.org/10.3886/ICPSR01252.v1

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Summary

This article analyzes the effects that institutional design of a firm has on the allocation of control over the firm's assets. The efficient allocation of control is a necessary condition for the optimal allocation of resources. Dynamic efficiency in resource allocation presupposes that control over firms will change hands when a given allocation becomes suboptimal. Typically, changes in control are brought about through (successful) tender offers or block trades. With regard to takeovers, a firm may have two types of value to consider: First, there is the public value of the firm, which is the market value of the firm's securities. Second, there may be a private value of the firm. The private value is the benefit an investor enjoys from exercising control over the firm. Private control benefits are most significant for entrepreneurial start-ups, for established family-owned businesses, and for organizations in which personal investors also pursue non-pecuniary goals, such as media groups or professional sports organizations. Of the legal arrangements identified in the finance literature, the most significant for wealth maximization in takeovers are the one share-one vote principle, majority rule, and mandatory tender offers. The authors analyze the implications of these three institutional arrangements in a simple textbook takeover model. The model helps in understanding the optimal design of a legal environment in which the market for corporate control promotes efficient allocation of capital.

Citation

Schmid, Frank A. Voting Rights, Private Benefits, and Takeovers. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2002-03-08. https://doi.org/10.3886/ICPSR01252.v1

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Distributor(s)

Inter-university Consortium for Political and Social Research
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Data Collection Notes

  1. (1) The file submitted is a data file, 0201fsd.txt. (2) These data are part of ICPSR's Publication-Related Archive and are distributed exactly as they arrived from the data depositor. ICPSR has not checked or processed this material. Users should consult the investigator if further information is desired.

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Original Release Date

2002-03-08

Version History

2018-02-15 The citation of this study may have changed due to the new version control system that has been implemented. The previous citation was:
  • Schmid, Frank A. Voting Rights, Private Benefits, and Takeovers. ICPSR01252-v1. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2002-03-08. http://doi.org/10.3886/ICPSR01252.v1
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Notes

  • These data are flagged as replication datasets and are distributed exactly as they arrived from the data depositor. ICPSR has not checked or processed this material. Users should consult the investigator(s) if further information is desired.

  • The public-use data files in this collection are available for access by the general public. Access does not require affiliation with an ICPSR member institution.