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Toehold Acquisitions, Shareholder Wealth, and the Market for Corporate Control

Published online by Cambridge University Press:  06 April 2009

Dosoung Choi
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Abstract

This study examines the valuation consequences of control-related outcomes that follow toehold acquisitions. We find evidence that toehold acquisitions facilitate value enhancing control transfers. The types of control transfers not only include takeovers, but also internal mechanisms, such as proxy fights and management turnovers. We find that toehold targets experiencing such control transfers exhibit an abnormal increase in share value, while those not experiencing such control transfers exhibit an abnormal decrease in share value. The results suggest that the positive valuation effect associated with toehold acquisitions reflects the expected benefits of subsequent control transfers.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 26 , Issue 3 , September 1991 , pp. 391 - 407
Copyright
Copyright © School of Business Administration, University of Washington 1991

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