This paper demonstrates that non-voting shares can promote takeovers. When the bidder has private information, shareholders may refuse to tender because they suspect to sell at an ex post unfavourable price. The ensuing friction in the sale of cash ‡ow rights can prevent an e¢ cient change of control. Separating cash ‡ow and voting rights alters the degree of cross-subsidization among bidder types. It can therefore be used as an instrument to promote takeover activity and to discriminate between e¢ cient and ine¢ cient bidders. The optimal fraction of non-voting shares decreases with managerial ability, implying an inverse relationship between …rm value and non-voting shares.JEL Classi…cation: G32, G34
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