Seminar with Francisco Urzúa Infante, Tilburg School of Economics and Management, Tilburg University
Upcoming Finance Seminar with Francisco Urzúa Infante, Tilburg School of Economics and Management, Tilburg UniversityFrancisco Urzúa Infante will present:Non-Controlling BlocksNon-controlling blocks arise when a firm acquires a significant stake in another firm that already has a controlling shareholder. Using a sample of European deals I study non-controlling blocks. I study both their determinants and their effects. Consistent with a potential expropriation by targets’ controlling shareholders, I find that targets’ agency problems not only discourage them from taking place, they also affect the price acquirers pay. Yet non-controlling blocks also fulfill two roles. They help financial acquirers in getting their targets being taken over afterwards. They also solve contractual incompleteness’ problems between firms and their intensive R&D suppliers. In line with this, non-controlling blocks’ targets increase investment and innovation after the deal. Surprisingly, they do not seem to alleviate targets’ financial constraints.