New York University Law Review
Do shareholders benefit from management decisions to resist tender oJfers? Professor Easterbrook and Mr. Jarrell think the evidence is unequivocal They cite three recent studies of post-offer movements in the prices of target stocks which show that successful defensive tactics by management have deprived target shareholders of appreciation gains worth between fifteen and fifty-two percent of the value of targets hares. They then introduce the results of their own more conventional study: had these gains been realized and reinvested in equity securities, shareholders would have fared considerably better during the past decade. The authors argue that a similar study by Kidder, Peabody & Co. reaches a seemingly contrary result because it erroneously compares the post-offer performances of these target stocks to the rate of inflation rather than to the performance of the equity market. The latter far outpaced inflation in recent years and thus, in the authors' view, provides a better measure of the true cost of defensive tactics to investors. This cost is enormous, the authors conclude. and warrants dose judicial scrutiny, if not outright prohibition, of defensive tactics.
Frank H. Easterbrook & Gregg A. Jarrell, "Do Targets Gain from Defeating Tender offers?," 59 New York University Law Review 277 (1984).