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on Corporate Finance |
| By: | Luigi Guiso (University of Sassari, University of Chicago & CEPR); Paola Sapienza (Northwestern University, NBER, & CEPR); Luigi Zingales (University of Chicago Graduate School of Business) |
| Abstract: | We provide a new explanation to the limited stock market participation puzzle. In deciding whether to buy stocks, investors factor in the risk of being cheated. The perception of this risk is a function not only of the objective characteristics of the stock, but also of the subjective characteristics of the investor. Less trusting individuals are less likely to buy stock and, conditional on buying stock, they will buy less. The calibration of the model shows that this problem is sufficiently severe to account for the lack of participation of some of the richest investors in the United States as well as for differences in the rate of participation across countries. We also find evidence consistent with these propositions in Dutch and Italian micro data, as well as in cross country data. |
| Keywords: | Stock Market Participation, Trust, Portfolio Choice |
| JEL: | D1 D8 |
| Date: | 2005–09–19 |
| URL: | http://d.repec.org/n?u=RePEc:cfs:cfswop:wp200527&r=cfn |
| By: | Burkart, Mike; Panunzi, Fausto |
| Abstract: | This paper reviews the existing literature on takeovers. Takeovers are a means to redeploy corporate assets more efficiently and to discipline incumbent management. However, an active market for corporate control also brings about potential inefficiencies. Takeovers may be undertaken for reasons other than value creation and the threat of a control change can induce inefficient actions on the part of target firm management and employees. The functioning of the market for corporate control is further impaired by incentive and coordination problems inherent in the takeover process. When the target firm is owned by many small shareholders, the free-rider problem prevents bidders firms from earning a profit on the tendered shares. We analyse implications of this problem as well as ways to overcome it. As widely held firms are atypical in many countries, we also discuss the impact that target ownership structure has on the incidence and efficiency of control transfers. |
| Keywords: | efficiency of control transfers; free-rider problem; takeovers |
| JEL: | G34 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5572&r=cfn |