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Separating Ownership and Information

Author

Listed:
  • Paul Voss
  • Marius Kulms

Abstract

This paper identifies an upside of the separation of ownership and control, typically the source of inefficiencies in the theory of the firm. Because insiders obtain private information by exercising control, the separation of ownership and control leads to a separation of ownership and information. We show that this separation is necessary for efficient trade in the market for corporate control. The analysis reveals how strategic communication between inside and outside shareholders facilitates takeovers by eliciting external bidders' private information. Our results call into question mandatory disclosure requirements during takeovers.

Suggested Citation

  • Paul Voss & Marius Kulms, 2022. "Separating Ownership and Information," American Economic Review, American Economic Association, vol. 112(9), pages 3039-3062, September.
    • Handle: RePEc:aea:aecrev:v:112:y:2022:i:9:p:3039-62
    DOI: 10.1257/aer.20211069
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    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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