Scandinavian Working Papers in Economics
SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics
No 50: The Optimality of the Mandatory Bid Rule
Clas Bergström (), Peter Högfeldt () and Johan Molin
Additional contact information
Clas Bergström: Dept. of Finance, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
Peter Högfeldt: Dept. of Finance, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
Johan Molin: Dept. of Finance, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
Abstract: A recent legislative directive from the Commission of the European Community proposes and enactment of a Mandatory Bid Rule (MBR): a bidder trying to acquire control of a firm should be required to extend the offer for all shares of the firm. This paper analyzes how adoption of such a rule affects shareholder wealth and allocative efficiency. We derive a general design principle, which precisely characterizes when the MBR is in the interest of the shareholders and when it is not, and evaluate the MBR as a policy instrument. The design principle is shown to closely approximate the choice of the optimal bidform.
Keywords: Takeovers; corporate finance; corporate governance; auctions regulations
34 pages, March 1995
Questions (including download problems) about the papers in this series should be directed to Helena Lundin ()
Report other problems with accessing this service to Sune Karlsson ().
RePEc:hhs:hastef:0050This page generated on 2024-09-13 22:15:03.