Speaker:
Woochan Kim
Korea University Business School and ECGI
Discussant:
Abstract
Paper Authors: Yongjoon Lee, Bushik Kim, and Woochan Kim
In a study leveraging the staggered adoption of mandatory bid rules (MBRs) across 41 nations spanning five decades (1972-2022), Kim, Kim, and Lee (2023) uncovered that these regulations led to a decrease in control premiums, subsequently reducing the incentive to extract private benefits after gaining control. They employed a series of staggered difference-in-differences (DiD) regressions, treating acquisitions beyond the threshold as treatment groups and the years post the MBR adoption as treatment years. The authors argue that when a mandatory bid rule is in effect, acquirers must work to keep control premiums low to prevent their acquisition costs from becoming prohibitive. This occurs because a higher control premium makes the offering price more attractive and signals a heightened risk of expropriation, leading more minority shareholders to tender their shares.
