The combination of post-takeover moral hazard by the bidder and free-riding by the target shareholders leads the former to acquire in a tender offer as few shares as necessary to gain control. As moral hazard is most severe under such low ownership concentration, substantial inefficiencies arise also in successful takeovers. Rules prompting ownership concentration (e.g. super-majority, one share - one vote) limit both agency costs and the occurrence of takeovers. Socially and privately optimal resolution of this trade-off generally differ. Furthermore, higher takeover premia induced by rules that intensify competition (e.g. departing from one share - one vote) translate into higher ownership concentration and are thus beneficial. Again socially and privately optimal balance between high premia and ex-post efficiency do not need to coincide. In particular, it is shown that one share - one vote and simple majority are generally not optimal, while a Compulsory Acquiring Limit can be Pareto improving.
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