Share repurchases mechanisms: a comparative analysis of efficacy, shareholder wealth, and corporate control effects
This paper compares the dutch auction and transferable put rights (TPRs) share repurchase mechanisms to the traditional fixed-price tender offer in terms of efficiency, wealth transfers, and corporate control. Using Monte Carlo simulations, it is shown that both alternative mechanisms reduce the deadweight losses from inefficient tendering by ensuring that shareholders with the lowest reservation prices are bought out first. The TPR mechanism is further distinguished because it provides greater wealth gains to nontendering and smaller gains to exiting shareholders. The dutch auction mechanism has an efficiency advantage over the TPR because it can be designed to eliminate the possibility of undersubscription and, furthermore, is also a more effective takeover deterrent.
Year of publication: |
1991
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Authors: | Noe, Thomas ; Gay, Gerald ; Kale, Jayant R |
Publisher: |
Financial Management Association International |
Saved in:
Online Resource
Type of publication: | Article |
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Language: | English |
Notes: | Noe, Thomas, Gay, Gerald and Kale, Jayant R (1991) Share repurchases mechanisms: a comparative analysis of efficacy, shareholder wealth, and corporate control effects. Financial Management (USA), 20 (1). pp. 44-59. |
Source: | BASE |
Persistent link: https://www.econbiz.de/10011423053
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