Template-Type: ReDIF-Paper 1.0
Title: Strategic Information Transmission and Efficient Corporate Control
Author-Name: Paul Voß
Author-Email: paul-voss@uni-bonn.de
Author-Name: Marius Kulms
Author-Email: 


Classification-JEL: D82, D83, G34, G38
Keywords: Communication, cheap talk, takeover, tender oer, signaling

Abstract: We present a model of corporate takeovers in which both, a potential acquirer and incumbent
management have private information about the firm value under their respective
leadership. Despite the two-sided asymmetric information and endogenously misaligned
interests of shareholders and incumbent management, first-best control allocation is feasible
if incumbent management can strategically communicate with shareholders. However,
shareholders prefer access to more information than revealed in equilibrium. This demand
for information leads to inefficiently few takeovers. The model provides implications for
the regulation of disclosure requirements and fairness opinions, as well as empirical predictions
that link executive compensation to takeover outcomes.

Note: 
Length: 51
Creation-Date: 2020-06
Revision-Date: 
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp180
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2020_180