Let's make a deal! How shareholder control impacts merger payoffs

Mergers and acquisitions are well-suited events for a detailed study of the valuation effects of corporate governance structures. Using a sample of 388 takeovers announced in the friendly environment of the 1990s, I empirically show that target shareholder control, proxied by low target chief executive officer share ownership, low fractions of inside directors, and the presence of large outside blockholders, is positively correlated with takeover premiums. In contrast, studies of takeovers in the hostile environment of the 1980s have shown a negative relation between target shareholder control and takeover premiums.