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Raffaele Corvino (CASS Business School, London)

17 September 2015 at 1:00 PM - 2:00 PM

Room Sala riunioni (livello docenti)

Title:  Optimal stake acquisition: explaining heterogeneity in ownership share transactions

Abstract: This paper makes the first attempt to rationalize the observed heterogeneity in the corpo-rate acquisitions, in terms of ownership share acquired in the transaction. The paper models the optimal choice of the acquiring company, in forms of percentage of shares to buy in a target firm. The buyer trades-off the expected profits and the potential bail-out costs, that may have to afford in order to rescue the target, in case of distress, where both revenues and costs are function of the acquired stake. By adopting a structural framework, the model is able to explain the variation in the stake acquisition, on a continuous set of values up to 100%. The model is calibrated to a benchmark sample of ownership share transactions. A statistical analysis is performed to compare the model predictions and the observed sample, showing a good ability of the model in replicating the real data.