Capital Structure and Ownership Distribution of Tender Offer Targets: An Empirical Study

Elias Raad · Robert Ryan

25 citations0/0 files storedFinancial Management

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Abstract

This study investigates the capital and ownership structure of firms receiving tender offers. Predictions of control-driven models developed by Haris and Raviv (1988) and Stulz (1988) and value-maximizing models developed by Israel (1991, 1992) are examined. The study reports results consistent with the predictions that: 1) target firms increase leverage during control contests, 2) leverage increases are higher when the tender offer is opposed, 3) leverage increases are higher when the tender offer is unsuccessful, and 4) ownership structure is important to explaining the success of tender offers. When tested jointly with other independent variables, only capital structure is statistically significant in explaining both management's opposition and the success of a tender offer.

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References

1988Managerial control of voting rights 1986Predicting takeover targets 1988The distribution of power among corporate managers, shareholders, and directors 1992The Role of Asset Structure, Ownership Structure, and Takeover Defenses in Determining Acquisition Likelihood 1989Managers' voting rights and corporate control 1988Corporate financial policy and corporate control 1991Capital Structure and the Market for Corporate Control: The Defensive Role of Debt Financing 1992Capital and Ownership Structures, and the Market for Corporate Control

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