The Impact of Market Inefficiency on TOB Strategies in Japan: A Theory and a Case in Japan

Abstract

M&A is a useful method of effective use of resources among firms and of corporate governance. However, a TOB in Japan is greatly interrupted by market inefficiency, and this inefficiency is caused by the psychology of investors and the custom of cross-shareholding.

The realizable strategy for the success of a TOB in such an inefficient market is to promise to employ the management of a target firm after the TOB and give the minimum rents that induce them to agree to it