Partial vertical ownership

Greenlee, Patrick; Raskovich, Alexander

doi:10.1016/j.euroecorev.2005.01.004

Cited by 51 publications

(61 citation statements)

References 19 publications

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“…In contrast, Malueg () finds that in a dynamic Cournot framework, repeated interactions between competitors can produce less collusion. Further, other authors study competitive aspects of participations either in a vertical supplier–dealer relationship or in a mixed framework (see, e.g., Greenlee & Raskovich, ; Serbera, ). Our article extends the study of the competitive role of PO by introducing asymmetric CPOs and leads to modified results depending on whether or not CPOs are used to prevent further concentration (takeovers).…”

Section: Literature Reviewmentioning

confidence: 99%

Takeover deterrents and cross partial ownership: The case of golden shares

Serbera

Fry

2019

Manage Decis Econ

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We analyse takeovers in an industry with bilateral capital‐linked firms in cross partial ownership (CPO). Before merger, CPO reduces the profitability of involved firms, confirming the “outsider effect.” However, the impact of CPO upon merger profitability is two‐sided in a Cournot setting. CPO, by cointegrating profits, increases output collusion leading to anticompetitive effects with facilitated mergers in most cases. Nonetheless, a protective threshold exists for which CPO arrangements can reduce the incentives for hostile takeovers. This has potentially significant regulatory implications. An illustrative example showcases the potential relevance of CPO as a defence against hostile takeovers across different industries.

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Section: Literature Reviewmentioning

confidence: 99%

Takeover deterrents and cross partial ownership: The case of golden shares

Serbera

Fry

2019

Manage Decis Econ

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“…This subsection assumes that the after merger marginal cost is equal to 1 − αβ with α > 1. 21 The merged firm will compete with the other rivals in the Cournot fashion, and its after merger profit will be equal to…”

Section: Exogenous Cost Reductionmentioning

confidence: 99%

Partial ownership and cross-border mergers

Stähler

2012

J. Econ.

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Partial ownership can be used as a screening device by a foreign firm which wants to merge with a local firm whose productivity is private information. As partial ownership is confined to sharing future merger profits, it cannot achieve true revelation in all cases but improves expected merger gains also in an equilibrium which is not fully separating. The example of a Cournot target market in which a horizontal merger reduces marginal cost demonstrates the general results. If cost reduction is exogenous, a separating equilibrium exists. If cost reduction is endogenously determined by investment of the merged firm, equilibria exist which do not fully separate but imply partial ownership.

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“…To achieve diversification, the cross participations can be acquired in the capital of rivals operating in the same or in different economic regions, into suppliers and clients firms, or unrelated businesses. Partial ownerships can also be also used to reinforce market power by linking profit objectives of firms at the horizontal level (Perotti, ; Reitman, ), in a vertical relationship (Greenlee & Raskovich, ), or in a mixed framework (Serbera, ). The theoretical (refer to e.g.…”

Section: Introductionmentioning

confidence: 99%

A New Strategy Against Hostile Takeovers: A Model of Defense in Participations

Serbera

2016

Manage. Decis. Econ.

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This article examines the efficacy of a 'defense in participations' policy consisting of competitors acquiring cross-equity participations within the same industry to prevent hostile takeovers. This defense in participations strategy provides disincentive for raiders as partial ownerships increase market power of competitors and then reinforce the 'outsider effect'. Also, we find conditions for a general result, which state that takeovers are less profitable in an industry with participations rather than in an industry without any capital links. We provide information to regulators about the positive social impact of cross participations in the context of mergers and expose an economic dilemma between a 'laissez-faire' and an interventionist approach.

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Partial vertical ownership

Cited by 51 publications

References 19 publications

Takeover deterrents and cross partial ownership: The case of golden shares

Takeover deterrents and cross partial ownership: The case of golden shares

Partial ownership and cross-border mergers

A New Strategy Against Hostile Takeovers: A Model of Defense in Participations

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