The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Initial Shareholdings and Overbidding in Takeover Contests
Published: 12/01/1995 | DOI: 10.1111/j.1540-6261.1995.tb05186.x
MIKE BURKART
Within the context of takeovers, this paper shows that in private‐value auctions the optimal individually rational strategy for a bidder with partial ownership of the item is to overbid, i.e., to bid more than his valuation. This strategy, however, can lead to i) an inefficient outcome, and ii) the winning bidder making a net loss. Further, the overbidding result implies that the presence of a large shareholder increases the bid premium in single‐bidder takeovers at the expense of reducing the probability of the takeover actually occurring.
Family Firms
Published: 09/11/2003 | DOI: 10.1111/1540-6261.00601
Mike Burkart, Fausto Panunzi, Andrei Shleifer
We present a model of succession in a firm owned and managed by its founder. The founder decides between hiring a professional manager or leaving management to his heir, as well as on what fraction of the company to float on the stock exchange. We assume that a professional is a better manager than the heir, and describe how the founder's decision is shaped by the legal environment. This theory of separation of ownership from management includes the Anglo‐Saxon and the Continental European patterns of corporate governance as special cases, and generates additional empirical predictions consistent with cross‐country evidence.
Agency Conflicts in Public and Negotiated Transfers of Corporate Control
Published: 12/17/2002 | DOI: 10.1111/0022-1082.00222
Mike Burkart, Denis Gromb, Fausto Panunzi
We analyze control transfers in firms with a dominant minority blockholder and otherwise dispersed owners, and show that the transaction mode is important. Negotiated block trades preserve a low level of ownership concentration, inducing more inefficient extraction of private benefits. In contrast, public acquisitions increase ownership concentration, resulting in fewer private benefits and higher firm value. Within our model, the incumbent and new controlling party prefer to trade the block because of the dispersed shareholders' free‐riding behavior. We also explore the regulatory implications of this agency problem and its impact on the terms of block trades.
Legal Investor Protection and Takeovers
Published: 01/16/2014 | DOI: 10.1111/jofi.12142
MIKE BURKART, DENIS GROMB, HOLGER M. MUELLER, FAUSTO PANUNZI
This paper examines the role of legal investor protection for the efficiency of the market for corporate control when bidders are financially constrained. In the model, stronger legal investor protection increases bidders' outside funding capacity. However, absent effective bidding competition, this does not improve efficiency, as the bid price, and thus bidders' need for funds, increases one‐for‐one with the pledgeable income. In contrast, under effective competition for the target, the increased outside funding capacity improves efficiency by making it less likely that more efficient but less wealthy bidders are outbid by less efficient but wealthier rivals.