Ownership Structure and Target Returns

Contrary to past literature, active ownership, defined as all officers and directors of the target firm, has no association with target returns. Rather, we find that inside (managerial) ownership has a positive relation with target returns, whereas active-outside (non-managing director) ownership has a negative relation with target returns. The relation between inside ownership and target returns is best explained by takeover anticipation, whereas the relation between outside ownership and target returns is best explained by outsiders' willingness to share gains with the bidder. While the relation between target returns and ownership measures is generally more pronounced for non-tender deals, it is more pronounced for tender offers between active corporate ownership and target returns