Fausto Panunzi

We study the role of legal investor protection for the efficiency of the market for corporate control. Stronger legal investor protection limits the ease with which an acquirer, once in control, can extract private benefits at the expense of non-controlling investors. This, in turn, increases the acquirer's capacity to raise outside funds to finance the takeover. Absent effective competition for the target, the increased outside funding capacity does not make efficient takeovers more likely, however, because the bid price, and thus the acquirer's need for funds, increase in lockstep with his pledgeable income. In contrast, under effective competition, the increased outside funding capacity makes it less likely that the takeover outcome is determined by the bidders' financing constraints-an...

Published: Legal Investor Protection and Takeovers With M. Burkart, D. Gromb, and F. P anunzi, Journal of Finance 69, 1129-1165, 2014 citation courtesy of

We present a model of succession in a firm controlled and managed by its founder. The founder decides between hiring a professional manager or leaving management to his heir, as well as on how much, if any, of the shares to float on the stock exchange. We assume that a professional is a better manager than the heir, and describe how the founder's decision is shaped by the legal environment. Specifically, we show that, in legal regimes that successfully limit the expropriation of minority shareholders, the widely held professionally managed corporation emerges as the equilibrium outcome. In legal regimes with intermediate protection, management is delegated to a professional, but the family stays on as large shareholders to monitor the manager. In legal regimes with the weakest protect...

Published: Mike Burkart & Fausto Panunzi & Andrei Shleifer, 2003. "Family Firms," Journal of Finance, American Finance Association, vol. 58(5), pages 2167-2202, October. citation courtesy of