The Distribution of Target Ownership and the Division of Gains in Successful Takeovers

Authors

  • RENÉ M. STULZ,

  • RALPH A. WALKLING,

  • MOON H. SONG

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    • Riklis Chair in Business and Associate Professor of Finance, The Ohio State University, and Assistant Professor of Finance, San Diego State University, respectively. We are grateful to Anup Agrawal, Warren Bailey, John Byrd, K. C. Chan, Larry Dann, Harry DeAngelo, Mike Fishman, Gerald Garvey, Rob Heinkel, Mike Jensen, Gregg Jarrell, Jon Karpoff, Mike Long, Francis Longstaff, Wayne Marr, David Mayers, Wayne Mikkelson, Patricia Reagan, Richard Ruback, Andrei Shleifer, Bill Schwert, Rex Thompson, and Mark Wolfson for useful discussions and comments, to participants at sessions at the American Finance Association and the Western Finance Association, and to the seminar participants at Harvard University, Indiana University, the Ohio State University, Southern Methodist University, the University of Rochester, and the Washington State University for helpful comments.


ABSTRACT

This paper presents evidence that the distribution of target ownership is related to the division of the takeover gain between the target and the bidder for a sample of successful tender offers. In the whole sample, the target's gain is negatively related to bidder and institutional ownership. In the sample of multiple-bidder contests, the target's gain increases with managerial ownership and falls with institutional ownership.

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