How fair are the fair price standards in blockholder regimes?

This paper examines the impact of frequent changes of investor protection regulation on the bid premium levels and the reception of the bid by the minority shareholders in blockholder regimes. In order to document the corporate governance function of takeover regulation, we explore a comprehensive data set representing more than 90% of the takeovers organized in Romania between 1998 and 2012. The peculiar institutional framework in Romania allows to factor in the analysis an hitherto unexplored structural element, namely the parallel control transactions managed by the Government, outside the stock market structures. After controlling for the influence of corporate governance and ownership attributes of targets, our main findings suggest that various market price components are strong predictors of both bid premiums and tender success. Besides, the alignment of legal details to the requirements of the European takeover regulation has a surprising negative effect on minority claimants. If the shareholders are indeed able to distil the pertinent information about a bid, our overall result suggests that the balance between competing concerns of protecting minority shareholders and facilitating value-creating transactions is still open to debate in emerging markets