The Effect of Institutional Investors' Voice on the Terms and Outcome of Freeze-out Tender Offers

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Abstract

We study the impact of institutional investors' "voice" on 201 going private tender offers by controlling shareholders ("freeze-out" offers) in Israel. Israeli regulatory intervention in freeze-out tender offers is relatively mild; thus, institutional investors' activism becomes crucial. We find that institutional voice has dual effects. On one hand, when there are pre-negotiations with institutional investors' (their voice is heard), accepted offers' premiums increase. On the other hand, when institutional investors express their voice, yet reject the offer, these rejections appear to hurt shareholders' value. We also document significant institutional investor exit after rejected offers, especially after offers preceded by voice (pre-negotiations with institutional investors).

Original languageEnglish
Article number2050002
JournalQuarterly Journal of Finance
Volume10
Issue number1
DOIs
StatePublished - 1 Mar 2020

Bibliographical note

Publisher Copyright:
© 2020 World Scientific Publishing Company and Midwest Finance Association.

Keywords

  • Going private transactions
  • bargaining with controlling shareholders
  • institutional investors activism
  • tender offers

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