# Anchoring in Takeovers Under Mandatory Bid Rule: Evidence From an Emerging Market

Adrian Pop, Diana Pop

► To cite this version:

Adrian Pop, Diana Pop. Anchoring in Takeovers Under Mandatory Bid Rule: Evidence From an Emerging Market. Economics of Transition and Institutional Change, 2025, 10.1111/ecot.12451. hal-05067197

HAL Id: hal-05067197

https://univ-angers.hal.science/hal-05067197v1

Submitted on 14 May 2025

HAL is a multi-disciplinary open access
archive for the deposit and dissemination of sci-
entific research documents, whether they are pub-
lished or not. The documents may come from
teaching and research institutions in France or
abroad, or from public or private research centers.

L'archive ouverte pluridisciplinaire HAL, est
destinée au dépôt et à la diffusion de documents
scientifiques de niveau recherche, publiés ou non,
émanant des établissements d'enseignement et de
recherche français ou étrangers, des laboratoires
publics ou privés.

<figure><img src="image_1.png" /></figure>

Distributed under a Creative Commons Attribution 4.0 International License
ORIGINAL ARTICLE

OPEN ACCESS

# Anchoring in Takeovers Under Mandatory Bid Rule: Evidence From an Emerging Market

Adrian Pop ID | Diana Pop ID

University of Angers (GRANEM), Angers Cedex 01, France

**Correspondence:** Diana Pop (diana.pop@univ-angers.fr)

**Received:** 6 September 2024

| **Revised:** 21 January 2025

| **Accepted:** 20 February 2025

**Funding:** The authors received no specific funding for this work. Diana Pop received financial support for attending international conferences (University of Angers, Rules and Markets Chaire—GRANEM of the University of Angers and PANORisk).

**Keywords:** 52-week high | acquisition premium | mandatory bid rule | minority shareholder rights | privatisation premium | reference point | tender outcome

## ABSTRACT

This article documents the existence of an anchoring bias in the pricing and acceptance of takeover bids in a blockholder regime where the mandatory bid rule applies. Our analysis, performed on the Romanian market for corporate control, shows that the 52-week high price of the target and the pricing of direct privatisations conducted by the government are strong predictors of both bid premium and outcome. The tender decision depends also on the scope of expropriation perceived by minority shareholders. Our results suggest that stronger capital market discipline is also important for insuring an effective protection of minority shareholders.

**JEL Classification:** G32, G34, G38

## 1 | Introduction

Takeover regulation is the main mechanism protecting the interest of minority shareholders in blockholder regimes. From a corporate governance perspective, the bidding conditions and pricing standards in corporate control transactions should mitigate agency problems related to the extraction of private benefits of control. The mandatory bid rule (hereafter MBR) establishes that any investor who wants to acquire a controlling position¹ in a listed company must make a tender offer bid (hereafter TOB) that meets two main criteria: (i) the TOB has to be made for *all* outstanding shares of the target and (ii) its pricing terms must be extended to *all* shareholders, including the minority ones. The non-discriminatory pricing mandated by law practically rules out any control premium documented for markets where bidders are free to negotiate only the controlling block with the incumbent (Bebchuk 1994).² From a theoretical point of view, Schuster (2013) shows that, under various sales-

of-control scenarios, the MBR deters the inefficient transactions and screens the best bidders. In a cross-country empirical study on its implementation in EU countries,³ Wang and Lahr (2017) document positive wealth effects for target shareholders, achieved primarily through higher takeover premiums. Loureiro and Silva (2023) stress that, when acquirers are companies incorporated in countries with high governance standards, the valuation of EU target increases after the enforcement of takeover regulation. These findings strengthen the theoretical argument according to which the takeover premium can function as an automatic protection device (Burkart et al. 1998, 2006).

In order to get insights on the features of acquisitions in blockholder regimes under MBR, we examine all the TOB approved by the Romanian Securities and Exchange Commission (hereafter RSEC), involving the Romanian public companies from 1998 to 2017.⁴ A peculiarity of the Romanian

This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.

© 2025 The Author(s). *Economics of Transition and Institutional Change* published by John Wiley & Sons Ltd on behalf of European Bank for Reconstruction and Development.
market for corporate control is that TOB have been always made at a non-discriminatory price to all shareholders. However, despite the application of the MBR from the very stock market establishment, Romania has often been criticised for the low quality of legal protection of minority shareholders. Such a criticism makes us wonder whether the practical significance of MBR was rooted in a poor analysis of the domestic institutional structures from this emerging market. We provide evidence that the privatisation, conducted independently under the leadership of the Romanian government, had been a key governance issue not only for the dynamics of ownership structures in listed companies but also for the market regulation applied to corporate control transactions. The comprehensive datasets on the M&A process and privatisations enable us to investigate whether the prospective acquirers (target shareholders) address the institutional and regulatory conditions at hand to inform their pricing (tender) decisions.

To present a comprehensive picture of takeovers, we conduct an empirical analysis on the size of takeover premiums and bid outcomes. The takeover premium is measured by comparing the acquisition price, as stated in the takeover document or the final amendment of it, to the available market price 42 days prior to the public announcement of the TOB. By using this proxy instead of the cumulative abnormal return, the most familiar M&A metric used in the literature, we address one of the main drawbacks of nascent stock markets, namely the severe market illiquidity. Indeed, performing an event study would result in the reduction of our sample size by over 70%. The cumulative abnormal returns (CARs) would indicate how the market perceives the value creation by the acquirer. However, in our view, the takeover premium is a more direct measure of the compensation received by the target shareholders who accept the bid.

We define the bid outcome (tender offer success) as the *effective completion rate* by taking into account the number of tendered shares as stated in the official closing report. Compared to the definition of a bid-win outcome, assuming that a takeover bid succeeds only if it triggers an explicit change in control, within our framework an unconditional bid offer would fail only if no share has been tendered. Our measure emphasises the principle of “shareholder democracy,” arguing that target company’s shareholders are far better placed to judge the merits of an offer. Indeed, the price standards established by the MBR protect minority shareholders only if they explicitly receive the acquisition price, which in turn requires them to fully exercise their exit option by the bid closing (Wang and Lahr 2017).⁵

An extensive prior literature on M&As, reviewed by Betton et al. (2008) and Eckbo (2009), identifies empirical research regularities about the likely determinants of these two features of bidding strategy. It is worth mentioning that the practical details of takeover contests and sampling criteria make several well-documented determinants of takeover premiums in developed markets (viz. the method of payment, hostility and relative size of acquirer and target) completely irrelevant to our analysis. Our comprehensive reading of takeover document reveals that target shares have been paid only in cash and, except for competing bids made by rival offerors, any other type of takeover defence was anecdotal, at best. As we do not apply any

filter based on the acquirer's type, legal status or size, our sample contains the TOB initiated not only by corporations but also by institutional and individual investors.⁶

Covering the quasi-totality of TOB, lets us bring some institutional context from transition economies to the M&A literature. Particularly, we seek to illustrate the interplay between two complementary types of control transactions that had taken place over the analysed period, namely (i) acquisitions deals performed in the market and (ii) privatisations conducted by the government. We analyse, for the first time to the best of our knowledge, whether the privatisation premium required by the government for its remaining stakes in publicly listed corporations drives the takeover premium paid by private investors. In our contention, the within-industry average pricing of partial privatisations plays a yardstick role in anchoring the value of control and affects the propensity of acquirers to overpay in M&As. Although privatisation routinely delivers a basis for the price of control, the size of privatisation premiums (or discounts) in other public companies should not affect the reception of the bid by the target shareholders and thus their tendering decision.

Our novel reference point for the bidder extends the literature initiated by Baker et al. (2012), who shows that recent peak prices become a common reference in M&As and have a significant effect on both the bidding price and willingness of target shareholders to embrace the offer. The appeal of the target company's 52-week high price is well documented for developed markets (see Suzuki and Kruse 2010; Betton et al. 2014; Ang and Ismail 2015; Chiara and Madura 2015; Suzuki 2018; Guo et al. 2019; Ma et al. 2019), cross border transactions (Smith et al. 2019) and private targets (Chiara et al. 2018). The basic idea goes back to the original work of Tversky and Kahneman (1974), suggesting that individuals tend to rely on “reference points” or “anchors” in the processes of judgement or especially when they are facing complex decision-making tasks.⁷

This anchoring phenomenon is expected to be even more relevant in emerging markets, when the uncertainty concerning the target value is high, the information is less accurate, and the ownership is composed of less sophisticated investors with limited arbitrage capabilities. The proximity between 52-week high and a recent level of trading price shapes the investors' assessment of the value of shared benefits of control. Consequently, we conjecture that the target shareholders are more inclined to tender their shares when the offer price is close to the historical highs. In emerging markets, the legal rules aiming to enhance the protection of minority shareholders are frequently changed. Consistent with the so-called “learning hypothesis” (Bebchuk et al. 2013), the market trading should reflect the legal developments addressing the governance quality, thus raising the overall level of market prices.⁸

Our main results show that, besides the ownership features of targets and other fundamental factors, *price benchmarks* are significant determinants of the takeover premium and bid outcome. Thus, (i) the most recent highest market price, 52-week high, has a positive effect on the valuation of the bid; (ii) the within-industry pricing of privatised government stakes
is a significant driver of takeover premiums and (iii) the tender
rate increases with the 52-week high, bid premium and amen-
ded final price. Moreover, the tender rate also increases when
target shareholders perceive a higher expropriation risk (e.g.
targets with untraded stocks or targets already controlled over
the squeeze-out threshold).

The remainder of the paper is structured as follows. Section 2 explains the substantial differences between takeover bids made by private investors, on one hand, and privatisation deals conducted by the Romanian government, on the other hand. It also describes the evolution of market regulation by stressing the exceptions to the MBR tailored for the government in the national takeover law and discusses the linkages between these two distinct types of control transactions, which are central to our main research question. Section 3 describes the raw data we collected on the M&As and privatisation deals as well as the selection criteria applied to define our broad sample. In Section 4, we document the steps taken to construct the variables at the core of our study and discuss the empirical results. Section 5 concludes by emphasising several implications of our main results for takeover regulation.

2 | Takeover Bids versus Privatisation Deals

The Romanian market for corporate control is well suited to
assess the effectiveness of the MBR because it allows endorsing
the dynamics of takeover regulation into the broader institu-
tional framework of a country in transition from a state to a
market economy.

According to the market law enforced in Romania, a private
investor must make a mandatory (voluntary) bid offer, directly
to the shareholders of a listed target company, for all (a portion)
of outstanding shares, with respect to a legally defined threshold
of corporate voting rights. The bid terms must be approved by
the RSEC before launching the public offer. The content of the
offer document is standardised, whereas amendments to the bid
price, period and closing are strictly regulated. However, the
conditions under which the public offer should be conducted
have been frequently modified through time in order to address
challenges raised by the rapid change of corporate landscape. A
mapping of 12 regulatory regimes presented in Appendix A
(Table A1. mandatory bid rule and Table A2. delisting condi-
tions and squeeze-out offers), reveals that *all* takeover bids have
*always* been conducted at a non-discriminatory price for *all*
shareholders. However, in line with the prescriptions of the EU
Takeover Directive, the 2004 Market Law revises the MBR
trigger downward, from 50% to 33%, reducing thus the scope of
partial offers.⁹

To better grasp the dynamics of ownership structures of listed
companies, it is essential to examine the role played during the
transition to a market economy by the Romanian government in
its capacity as shareholder. Its involvement in the chronology of
corporate control transactions casts an entirely different light on
some flagship legal measures levelling the playing field, such as
ownership transparency provisions,¹⁰ mandatory bid and
squeeze-out rules. Besides, the special treatment applied to the

transactions involving the Romanian government's equity
holding allows us to address the exceptions from the general
principles that could affect the interests of minority
shareholders.

Despite the prevailing opinion, the privatisation did not occur
as a one-time process leading to fully private ownership. In
Romania, the privatisation had spanned over 20 years and
involved practically the same set of companies into three
different strategies: (i) privatisation to the Employee Associ-
ations; (ii) the Mass Privatisation Programme organised in
two waves, in 1992 and 1995, respectively¹¹ and (iii) direct
sales of the remaining majority or minority stakes managed
exclusively by the Romanian Privatisation Authority (here-
after RPA).

The private ownership in the Romanian listed companies is an
artefact of the mass privatisation programme. At the end of the
period, during which all adult citizens were entitled to under-
write (for free) shares in app. 6000 companies, the government
had still kept at least a minority stake. All these partially pri-
vatised companies were listed immediately on the stock ex-
change in order to allow this peculiar type of individual
shareholders selling their shares. Meanwhile, the RPA
continued to manage the government portfolio by divesting its
remaining stakes in publicly traded companies directly to pri-
vate investors outside the bounds of the stock exchange.

Summary statistics presented in Table 1 illustrates the impres-
sive scale of the privatisation phenomenon in Romania,
excluding the mass privatisation programme. Between 1993 and
2012, the RPA had organised 7620 privatisation deals involving
listed companies: in 52% of cases, the stakes were higher than
10%; in 28% of cases, the buyer dealt the majority stake; whereas
in 6% of cases, the block exceeded 90% of the voting rights.

When an investor can get control in a listed company by cir-
cumventing the market, she/he has an obvious large informa-
tion advantage over external investors and an opportunity to
exploit the inefficiencies caused by the low free float. Besides,
partial privatisations organised in multiple rounds for the same
company, involving only minority stakes, enlarge the scope of
subsequent stealth acquisitions. The empirical distribution of
the privatisation deals involving the target companies included
in our M&A sample reveals that many acquirers had previously
bought the majority block directly from the RPA outside the
market structures (see Table 2). Conditional on the occurrence
of the privatisation before the TOB date, the target companies
included in our M&A sample had been privatised between 1994
and 2006. We find that the targets were involved in 1396 pri-
vatisation transactions, from which 384 deals were made with
the bidders. In 220 of these cases, the bidder bought the majority
stake directly from the RPA.

Buying a block in a listed company directly from the RPA,
instead of accumulating pre-takeover shareholdings by trading
on open market, affects the timing when prospective bidders
reveal their target valuation to the market. Particularly, it de-
prives the rule of disclosure of substantial ownership¹² of its
main function as exclusionary mechanism, that is limiting the
initial stake of bidders at the early stages of a takeover.
<table><caption>TABLE 1 | Privatisation deals performed by the RPA, by type of privatised company and by the size of privatised block.</caption><thead><tr><th rowspan="3">Privatised<br>block</th><th colspan="6">Single privatisation round</th><th colspan="6">Multiple privatisation rounds</th></tr><tr><th colspan="3">Single buyer</th><th colspan="3">Multiple buyers</th><th colspan="3">Single or multiple buyers</th><th colspan="3">Multiple buyers</th></tr><tr><th>All<br>companies</th><th>Listed<br>companies</th><th>Target<br>companies</th><th>All<br>companies</th><th>Listed<br>companies</th><th>Target<br>companies</th><th>All<br>companies</th><th>Listed<br>companies</th><th>Target<br>companies</th><th>All<br>companies</th><th>Listed<br>companies</th><th>Target<br>companies</th></tr></thead><tbody><tr><td>&lt;10%</td><td>82</td><td>33</td><td>13</td><td>129</td><td>95</td><td>76</td><td>1343</td><td>909</td><td>133</td><td>1554</td><td>1037</td><td>241</td></tr><tr><td>[10%-33%)</td><td>114</td><td>59</td><td>14</td><td>155</td><td>139</td><td>56</td><td>990</td><td>782</td><td>122</td><td>1259</td><td>980</td><td>275</td></tr><tr><td>[33%-50%)</td><td>1752</td><td>1542</td><td>277</td><td>41</td><td>31</td><td>9</td><td>1682</td><td>1430</td><td>294</td><td>3475</td><td>3003</td><td>602</td></tr><tr><td>[50%-90%)</td><td>2769</td><td>1317</td><td>263</td><td>18</td><td>6</td><td>3</td><td>1203</td><td>808</td><td>146</td><td>3990</td><td>2131</td><td>415</td></tr><tr><td>[90%-100%)</td><td>414</td><td>331</td><td>85</td><td>0</td><td>0</td><td>0</td><td>159</td><td>135</td><td>24</td><td>573</td><td>466</td><td>109</td></tr><tr><td>100%</td><td>221</td><td>3</td><td>0</td><td>0</td><td>0</td><td>0</td><td>100</td><td>0</td><td>0</td><td>321</td><td>3</td><td>0</td></tr><tr><td>Total</td><td>5352</td><td>3285</td><td>652</td><td>343</td><td>271</td><td>144</td><td>5477</td><td>4064</td><td>719</td><td>11,172</td><td>7620</td><td>1515</td></tr></tbody></table>

Note: Single privatisation round: the RPA made a single privatisation deal with the company stock. Multiple privatisation rounds: the RPA made at least two privatisation deals with the company stocks. Single buyer: the privatised block is sold to a single buyer. Multiple buyers: the privatised block is split between at least two buyers.

Note: All companies: listed and non-listed privatised companies; Listed companies: privatised companies that are publicly traded; target companies: privatised companies that are publicly traded and have been the target of a takeover bid.

According to Shleifer and Vishny (1986), once the stock market identifies the prospective bidders, they would no longer be able to buy the target shares at a price under their post-acquisition value.

It is worth noting that any private investor who gets a controlling stake in a listed company through a privatisation deal may get around the MBR. This derogation from the general principles, suggestively called “*Excepted Transactions*” in the domestic market law (see Appendix A, Table A1), accommodates the government’s interest undermining those of minority shareholders. Practically, the minority shareholders are not entitled to also sell their stakes when the government divests its equity holdings in a public company. Berglöf and Pajuste (2003) treat such peculiar block trades between the RPA and selected buyers as a manifestation of poor governance in Romania. These direct deals may involve blocks providing even more than 90% of the voting rights, which lead to an increase of the probability of company delisting, sometimes without performing any trading on the open market (Chemla et al. 2010).

The availability of ownership stakes per se, which had been fostered by a timely offer of the RPA blockholdings, had made the appetite of serial acquirers and empire builders easier to satisfy. Thus, any investor looking to become simply a “major” shareholder could (i) make a takeover bid for a controlling position in the market; (ii) directly negotiate the majority block in one of the companies still controlled by the RPA or (iii) combine two purchasing techniques of two partial stakes that together exceed the control threshold, one by dealing with the RPA and the other by launching a TOB to minority shareholders.

Such parallel control transactions conducted by the RPA have not only an obvious direct effect on the ownership structure of the privatised companies but also an aggregate effect on the pricing of blockholdings. Unlike acquisitions, which are all subject to takeover regulation, there is no legal requirement regarding the timing, selling method, pricing, covenants and closing of privatisation deals.¹³ The prices at which the RPA stakes in various public companies were sold had become progressively public information. They began to play a yardstick role for corporate valuation and give an insight on the scope of potential private benefits. Our hypothesis is that the average premium at which the government sold its remaining stakes in listed companies operating in the same industry as that of target plays a major role in anchoring the value of corporate control.

### 3 | Data and Sample Selection

The whole sample covers the 1998–2017 period. This sample is used in our main analysis of the role of the general reference price, 52-week high, in explaining the acquisition premium and bid outcome. Based on it, to conduct our analysis of the role of the *privatisation premium benchmark* as a strategic reference point, we select a subsample including only the TOB organised before 2004. The main reason for restricting the sample to a
<table><caption>TABLE 2 | Privatisation deals involving targets, performed before the bid date, by size of privatised block and year.</caption><thead><tr><th rowspan="2">Year</th><th colspan="5">Bidders</th><th colspan="5">Other investors</th></tr><tr><th>&lt;10%</th><th>[10%-33%]</th><th>[33%-50%]</th><th>[50%-90%]</th><th>[90%-100%]</th><th>&lt;10%</th><th>[10%-33%]</th><th>[33%-50%]</th><th>[50%-90%]</th><th>[90%-100%]</th></tr></thead><tbody><tr><td>1994</td><td>0</td><td>0</td><td>0</td><td>0</td><td>0</td><td>0</td><td>0</td><td>0</td><td>1</td><td>0</td></tr><tr><td>1995</td><td>0</td><td>0</td><td>0</td><td>1</td><td>0</td><td>1</td><td>6</td><td>21</td><td>28</td><td>0</td></tr><tr><td>1996</td><td>0</td><td>4</td><td>32</td><td>3</td><td>0</td><td>11</td><td>58</td><td>231</td><td>31</td><td>0</td></tr><tr><td>1997</td><td>0</td><td>3</td><td>37</td><td>22</td><td>2</td><td>13</td><td>9</td><td>77</td><td>42</td><td>0</td></tr><tr><td>1998</td><td>0</td><td>0</td><td>34</td><td>55</td><td>12</td><td>1</td><td>3</td><td>81</td><td>55</td><td>3</td></tr><tr><td>1999</td><td>0</td><td>0</td><td>22</td><td>41</td><td>19</td><td>0</td><td>3</td><td>79</td><td>108</td><td>13</td></tr><tr><td>2000</td><td>1</td><td>8</td><td>15</td><td>20</td><td>23</td><td>8</td><td>3</td><td>38</td><td>43</td><td>12</td></tr><tr><td>2001</td><td>0</td><td>0</td><td>1</td><td>4</td><td>1</td><td>2</td><td>0</td><td>2</td><td>8</td><td>4</td></tr><tr><td>2002</td><td>0</td><td>1</td><td>3</td><td>2</td><td>3</td><td>4</td><td>1</td><td>0</td><td>2</td><td>1</td></tr><tr><td>2003</td><td>0</td><td>0</td><td>2</td><td>2</td><td>8</td><td>0</td><td>0</td><td>1</td><td>0</td><td>4</td></tr><tr><td>2004</td><td>0</td><td>0</td><td>0</td><td>1</td><td>1</td><td>2</td><td>0</td><td>0</td><td>1</td><td>1</td></tr><tr><td>2005</td><td>0</td><td>0</td><td>0</td><td>0</td><td>0</td><td>0</td><td>0</td><td>0</td><td>0</td><td>0</td></tr><tr><td>2006</td><td>1</td><td>0</td><td>0</td><td>0</td><td>0</td><td>0</td><td>0</td><td>0</td><td>0</td><td>0</td></tr><tr><td>Total</td><td>2</td><td>16</td><td>146</td><td>151</td><td>69</td><td>42</td><td>83</td><td>530</td><td>319</td><td>38</td></tr></tbody></table>

Note: Bidders: identifies the privatisation transactions performed with the bidders. Other investors: identifies the privatisation transactions that have not been made with the bidders.

shorter period is that more than 99% of the privatisation deals involving listed companies took place before 2004 (see Table 2). Consequently, after 2004, we can no longer capture the effect of privatisation pricing.

## 3.1 | Takeover Transactions and Targets

Our dataset includes *all* the takeover bids approved by the RSEC between January 1, 1998, and December 31, 2017. As no standard database exists, we collect information on 1945 bids by confronting several sources of information: (i) RSEC takeover lists and weekly official bulletins; (ii) Bucharest Stock Exchange (hereafter BSE) electronic data; (iii) the news database of S.S.I. F. TRADEVILLE and (iv) Bursa newspaper, which publishes a large number of takeover announcements. After compiling the filings submitted to the BSE and RSEC decisions, we are able to collect a set of detailed information about the bidding strategy such as initial deal attributes, revised terms and rival offers.¹⁴ Thus, for a given bid, we collect the following essential information: (1) the RSEC approval date; (2) bidder's identity; (3) number of shares that are object of the bid; (4) initial bidding price; (5) beginning date; (6) closing date; (7) price amendments; (8) bidding period amendments; (9) number of tendered shares and (10) final ownership of the bidder. We exclude from the analysis the buyback offers, the clean-up transactions organised after 2005 and formally identified as such by the RSEC as well as the bids made for targets from the financial sector.

Of all transactions, we are able to compute the takeover premium for 1802 bids, based on the market price series sourced from S.S.I.F., ROMINTRADE and S.S.I.F BROKER, two electronic platforms containing the data warehouse provided by the BSE and the takeover success for 1889 bids.

## 3.2 | Privatisation Deals

To investigate the link between takeover market and privatisation, we exploit the RPA reports containing *all* government's sales by direct deals. The RPA provided us, on request, a list containing the following information about 11,172 privatisation deals performed between 1993 and 2011: (1) the name of the privatised company; (2) the privatisation date; (3) the privatised block; (4) the value of share capital privatised by the RPA; (5) the amount paid by the buyer; (6) the currency of the deal and (7) the identity of the buyer. Among those transactions, we identify 7620 deals involving listed companies, of which 4872 government's block divestures were made during the companies' public trading episode.

To illustrate the pricing effect of the privatisation from the above data, we screen out 791 transactions involving companies with no market price available, compile the deals made with a pool of buyers into a single one and keep only the deals performed after January 1, 1997, namely 52 weeks before the starting date of our sample of takeover bids. We are left with a sample of 3873 privatisation deals over the 1997–2011 period, involving publicly listed companies that have stock prices available before their privatisation. Finally, we keep in our dataset 3814 privatisation deals that took place between 1997 and 2004 and for which we have accurate and complete information.

## 4 | Empirical Analysis

The general form of our regression model incorporates the key variables of interest that are likely to serve as reference points and a vector of control variables, which are likely determinants of takeover premiums and bid outcome according to the literature on developed markets for corporate control (see Eckbo 2009).
## 4.1 | Takeover Premium

Our main dependent variables, the initial (final) offer premium, are defined as the log percentage difference between the initial (final) offer price and the target stock price 42 calendar days prior to the RSEC approval date.¹⁵

We use two distinct ways to capture the anchoring of takeover premium in reference prices in our regression models. First, the general reference price, 52-Week High, defined as the highest stock price over the last 52 weeks, is expressed as a log percentage difference from the target stock price 42 calendar days prior to the RSEC approval date.¹⁶ Second, the strategic reference point, Privatisation premium benchmark, is computed as 1-year moving average of the privatisation premiums, clustered by industry and matched to each TOB, based on the target industry classification. More precisely, based on the original data on privatisation deals, we compute first the privatisation price per share. Then, we divide each privatisation price by the market price of each privatised company, 42 days before the privatisation date in order to calculate the privatisation premium per company. Finally, we compute the Privatisation premium benchmark as the average of privatisation premiums for all companies operating in the target's industry and that were privatised during the 52 weeks preceding day t-14,¹⁷ where t is the TOB approval date. We address the radial influence of the pricing in privatisation on the pricing of TOB by constructing this benchmark for each TOB approved between 1998 and 2004.

The information regarding the privatisation deals is also used to quantify the foothold in targets obtained by bidders outside the market mechanism. Such long-term toeholds are part of the entrenching strategy at the target level. Following Pop (2006), we construct RPA foothold, which is an indicator variable that takes the value of 1 if the bidder has previously dealt a block in the target directly with the RPA (in 21.36% of the deals), and 0 otherwise. This variable captures the effect of an ownership block, irrespective of its size, bought by the bidder outside the market structures.

$$ \text{Premium}_i = \alpha_0 + \sum_{j=1}^{2} \alpha_j \cdot \begin{aligned}[t] & \text{Reference price}_j + \zeta_m \\ & \cdot \text{Vector of controls} + \epsilon_i \end{aligned} $$

The vector of control variables comprises corporate governance proxies, target and deal attributes as well as industry and time fixed effects. Direct toehold is the size of pre-offer ownership of acquirer, expressed as a percentage of the outstanding shares of the target. The toehold bidding is beneficial because it reduces the amount paid for the remaining shares and provides a competitive advantage over rival offers. Betton et al. (2009) show that there is a decreasing trend in the level of toeholds of acquirers in US targets and, despite the theoretical arguments in favour of positive toeholds, they are rare in mature markets.¹⁸ In our sample, in almost 80% of the 1883 bids, for which this information is available, the bidder has a positive toehold. To address the non-linearity in the relationship between takeover premium and bidder's ownership, we include toehold squared, when it is expressed as a continuous variable, and partition our sample across several toehold categories. In the last case, the

indicator variables are equal to 1 whenever the bidder's toehold (1) is zero; (2) is positive, but under the legal control threshold¹⁹; (3) exceeds the legal control threshold, but it is lower than the squeeze-out threshold²⁰ and (4) is higher than the squeeze-out threshold.

In all cases, we identify by reading the official takeover documents whether the bidder is acting in concert with other shareholders of the target (in 18.97% of the deals). The indicator variable concert, which is a proxy for indirect shareholdings, summarises this information.

In our sample, a concurrent offer is identified when there are at least two overlapping takeover bids for the same target, in which case the dummy variable Rival takes the value of 1. Over our sample period, this is the case in 8.71% of the deals. According to Fishman (1988), if the control is priced strategically, the targets attracting rival offers should receive lower initial premiums than those paid by uncontested bidders. This insight is questioned by Betton et al. (2014), who found that when a rival decides to compete, the initial offer premium plays no deterring role. However, under the pressure of competition, the bidders adjust more aggressively the final price or extend the acceptance period, leaving considerable leeway to target shareholders to opt for one of the rival bids. For these reasons, we account for such an effect only in the regressions explaining the final premiums.

Besides these explanatory factors, our cross-sectional analysis includes several other control variables, such as target size and bidder's type, as well as industry and time dummies. Target size is defined as the logarithm of market capitalisation on day t-42. The empirical findings in the literature (see Betton et al. 2008) suggest a negative relationship between the target size and bid premium, as far as the bidders are more concerned with the overpayment in large targets, especially when the cash payment component is involved (Billet and Ryngaert 1997). We remind that all TOB included in our sample are cash-paid acquisitions. Gorbenko and Malenko (2014) provide theoretical and empirical evidence that target valuation is dependent on the acquirer's type. They show that strategic bidders pay a significantly higher premium than the financial ones. We take into account the heterogeneity of restructuring ability and expropriation technologies across different types of controlling shareholders by distinguishing among five categories of acquirers: (1) individual investors; (2) corporations; (3) financial investors; (4) groups of more acquirers and (5) other types. Moreover, we also distinguish between domestic and foreign corporations²¹ (47.95% vs. 11.20%) in order to capture the heterogeneity in corporate governance standards they are acquainted to. The descriptive statistics presented in Table 3 reveal that the foreign corporations seek to own large companies and are inclined to pay more for acquiring them compared to any other bidder type. Finally, the industrial sectors were partitioned into nine categories according to the first-digit NACE codes: agriculture (4.98%); commerce (20.22%); construction (9.90%); extractive industry (2.02%); manufacturing (26.54%); metallurgical industry (12.23%); services (10.52%); tourism (6.58%) and transportation (7.00%).

Table 4 reports descriptive statistics for deal pricing, outcome variables and other control variables. Regarding the price variables, the median initial (final) acquisition premium is equal to
<table><caption>TABLE 3 | Bid stakes, bid values and target values by type of bidder.</caption><thead><tr><th></th><th>Mean</th><th>Std. dev.</th><th>Min</th><th>Q1</th><th>Median</th><th>Q3</th><th>Max</th></tr></thead><tbody><tr><td colspan="8"><strong>Foreign corporation (216)</strong></td></tr><tr><td>Bid stake</td><td>36.11%</td><td>34.44%</td><td>0.17%</td><td>6.79%</td><td>25.05%</td><td>52.3%</td><td>100%</td></tr><tr><td>Bid value</td><td>139.2</td><td>471.6</td><td>0.1</td><td>3.2</td><td>12.3</td><td>52.0</td><td>3801.7</td></tr><tr><td>Target value</td><td>555.8</td><td>1477.2</td><td>0.4</td><td>9.6</td><td>49.3</td><td>345.4</td><td>13,292.5</td></tr><tr><td colspan="8"><strong>Domestic corporation (925)</strong></td></tr><tr><td>Bid stake</td><td>38.3%</td><td>31.03%</td><td>0.02%</td><td>9.14%</td><td>32.52%</td><td>56.34%</td><td>100%</td></tr><tr><td>Bid value</td><td>13.9</td><td>66.7</td><td>0.0</td><td>0.6</td><td>1.9</td><td>7.0</td><td>1435.3</td></tr><tr><td>Target value</td><td>50.6</td><td>181.4</td><td>0.0</td><td>1.2</td><td>4.5</td><td>19.8</td><td>3335.0</td></tr><tr><td colspan="8"><strong>Foreign institutional investor (119)</strong></td></tr><tr><td>Bid stake</td><td>38.84%</td><td>28.99%</td><td>3.37%</td><td>11.46%</td><td>32.89%</td><td>56.92%</td><td>100%</td></tr><tr><td>Bid value</td><td>24.4</td><td>59.0</td><td>0.1</td><td>3.2</td><td>6.7</td><td>19.5</td><td>526.4</td></tr><tr><td>Target value</td><td>133.8</td><td>624.0</td><td>0.5</td><td>4.7</td><td>12.4</td><td>72.1</td><td>5878.4</td></tr><tr><td colspan="8"><strong>Domestic institutional investor (51)</strong></td></tr><tr><td>Bid stake</td><td>23.51%</td><td>22.65%</td><td>0.01%</td><td>4.35%</td><td>10.05%</td><td>42.58%</td><td>85.19%</td></tr><tr><td>Bid value</td><td>49.6</td><td>220.0</td><td>0.1</td><td>0.5</td><td>1.5</td><td>11.4</td><td>1526.7</td></tr><tr><td>Target value</td><td>895.7</td><td>5307.8</td><td>0.4</td><td>3.4</td><td>9.2</td><td>46.0</td><td>37,522.2</td></tr><tr><td colspan="8"><strong>Group of acquirers (38)</strong></td></tr><tr><td>Bid stake</td><td>31.62%</td><td>29.38%</td><td>2.12%</td><td>8.82%</td><td>22.99%</td><td>48.6%</td><td>100%</td></tr><tr><td>Bid value</td><td>44.6</td><td>125.0</td><td>0.1</td><td>1.3</td><td>5.2</td><td>15.3</td><td>710.0</td></tr><tr><td>Target value</td><td>260.7</td><td>712.4</td><td>0.3</td><td>1.8</td><td>34.2</td><td>80.2</td><td>3049.8</td></tr><tr><td colspan="8"><strong>Individual investor (559)</strong></td></tr><tr><td>Bid stake</td><td>39.00%</td><td>29.97%</td><td>0.48%</td><td>12.09%</td><td>33.28%</td><td>56.63%</td><td>100%</td></tr><tr><td>Bid value</td><td>5.3</td><td>16.6</td><td>0.0</td><td>0.3</td><td>1.1</td><td>3.6</td><td>269.7</td></tr><tr><td>Target value</td><td>20.5</td><td>59.0</td><td>0.0</td><td>0.7</td><td>2.8</td><td>11.3</td><td>643.0</td></tr><tr><td colspan="8"><strong>Others (21)</strong></td></tr><tr><td>Bid stake</td><td>71.23%</td><td>29.08%</td><td>21.14%</td><td>48.65%</td><td>74.00%</td><td>100%</td><td>100%</td></tr><tr><td>Bid value</td><td>13.9</td><td>28.4</td><td>0.1</td><td>3.6</td><td>6.8</td><td>11.4</td><td>132.7</td></tr><tr><td>Target value</td><td>46.9</td><td>143.4</td><td>0.2</td><td>2.1</td><td>4.5</td><td>11.5</td><td>615.7</td></tr><tr><td colspan="8"><strong>Whole sample (1,929)</strong></td></tr><tr><td>Bid stake</td><td>38.13%</td><td>31.03%</td><td>0.01%</td><td>9.39%</td><td>32.14%</td><td>55.91%</td><td>100%</td></tr><tr><td>Bid value</td><td>27.6</td><td>174.5</td><td>0.0</td><td>0.6</td><td>2.2</td><td>8.7</td><td>3801.7</td></tr><tr><td>Target value</td><td>133.3</td><td>1056.5</td><td>0.0</td><td>1.4</td><td>5.8</td><td>28.7</td><td>37,522.2</td></tr></tbody></table>

Note: This table presents separately for each type of bidder, (i) the bid stake sought by the acquirer expressed in percentage points (in italic); (ii) the bid value expressed in 100 k RON and (iii) the target value expressed in 100 k RON. The number of takeover bids is indicated in parentheses separately for each bidder type.

22.99% (35.67%), the median value of 52-Week High is 39.69%, whereas the median Privatisation premium benchmark is 132.59%. These values are all expressed as log percentage differences in order to deal with the observed wide variations in the price variables. Note that the privatisation premium benchmark is only available for the 1998–2004 period, which explains the lower number of observations (roughly 1500). Among our controls, the stake in the target’s equity owned by the acquirer at the bid date, Direct toehold, is 41.88% on average, whereas the percentage change from the initial to the final offer price, when the bidder revised its TOB price, is 3.39% on average (median 1.84%).

Table 5 summarises the least-squares estimates of our equation of interest, separately for the initial (models 1–3) and final bid premium (models 4–6), for the whole sample. The results indicate that the level of acquisition premium depends significantly on the highest price of the target during the year preceding the bid. The magnitude of the coefficient on the reference point ranges between 0.20 and 0.24, which implies that for every 10% increase in the 52-week high price of the target, the bid premium is 2% higher. The positive effect of 52-Week High is robust across model specifications, in line with the findings of Baker et al. (2012), Betton et al. (2014), and Smith et al. (2019).
<table><caption>TABLE 4 | Descriptive statistics on the main variables.</caption><thead><tr><th>Variable name</th><th>N</th><th>Mean</th><th>Std. dev.</th><th>Min</th><th>Q1</th><th>Median</th><th>Q3</th><th>Max</th></tr></thead><tbody><tr><td colspan="9"><em>Dependent variables</em></td></tr><tr><td>Initial bid premium</td><td>1802</td><td>45.89</td><td>96.79</td><td>-69.31</td><td>0.00</td><td>22.99</td><td>79.85</td><td>230.26</td></tr><tr><td>Final bid premium</td><td>1802</td><td>59.50</td><td>102.37</td><td>-67.01</td><td>0.85</td><td>35.67</td><td>102.96</td><td>261.24</td></tr><tr><td>Bid outcome</td><td>1889</td><td>36.22</td><td>35.55</td><td>0.00</td><td>1.72</td><td>24.69</td><td>69.14</td><td>100.00</td></tr><tr><td colspan="9"><em>Independent variables</em></td></tr><tr><td>52-Week high</td><td>1802</td><td>49.05</td><td>70.99</td><td>0.00</td><td>14.31</td><td>39.69</td><td>90.92</td><td>207.94</td></tr><tr><td>Direct toehold</td><td>1883</td><td>41.88</td><td>35.64</td><td>0.00</td><td>2.26</td><td>39.95</td><td>74.98</td><td>99.98</td></tr><tr><td>Target size</td><td>1802</td><td>13.41</td><td>2.35</td><td>9.86</td><td>11.87</td><td>13.27</td><td>14.87</td><td>17.50</td></tr><tr><td>Privatisation premium benchmark</td><td>1499</td><td>126.46</td><td>43.51</td><td>42.47</td><td>99.76</td><td>132.59</td><td>159.41</td><td>183.89</td></tr><tr><td>Bid jump</td><td>309</td><td>3.39</td><td>4.94</td><td>1.00</td><td>1.23</td><td>1.84</td><td>3.48</td><td>50.00</td></tr></tbody></table>

Note: The initial (final) bid premium (%) is computed as the initial/final offer price expressed as a log percentage difference from the target stock price 42 calendar days prior to the SEC approval date. Bid outcome (%) is the effective completion rate stated in the official closing report. 52-week high (%) is the highest stock price over the last 52 weeks expressed as a log percentage difference from the target stock price 42 calendar days prior to the SEC approval date. Direct toehold (%) is the stake in the target's equity owned by the acquirer at the bid date. Target size is the natural logarithm of the target's market capitalisation on day -42. Bid jump is the percentage change from the initial offer price to the final offer price. Privatisation premium benchmark (%) is the average privatisation premium of the privatised firms in the target's industry during a 12-month period before the bid.

The initial target valuation is decreasing in the bidder's toehold, but the effect is not linear. This is confirmed when the toehold is broken by category, based on the different levels of ownership addressed in the takeover regulation. Although there is no significant difference in the premiums paid by the controlling shareholder and those having no toehold, the acquirers with minority blocks pay, in relative terms, less than the controlling shareholders. In contrast, the acquirers owning more than 90% offer a higher premium compared with the controlling shareholders. A large stream of literature considers delisting carried out in strong corporate governance environments as an efficient way to protect minority shareholders (see Thomsen and Vinten 2014).

The acquirers who are acting in concert with other target shareholders, after controlling for the competition for the target, support more expensive acquisitions, pointing to the over-payment bias found in the case of cash-paid acquisitions. This is also the case for the bidders that have previously dealt a block in the target directly with the RPA outside the market structures. Once the bid is in play, the acquisition premium increases under the effect of competition for the target; the coefficient of *Rival* being positive and significant in all regressions where the final premium is the dependent variable (models 4–6). The premium is also higher when the acquirer is a foreign corporation. As expected, the shareholders of large targets receive lower acquisition premiums than those of small ones as shown by the significant and negative coefficient of *target size*.

We further address the idea that bidders could pay attention to the price solicited by the Romanian government for its ownership in privatised companies belonging to the same industrial sector. For that purpose, we re-examine whether previous statistical relationships remain valid after controlling for the original effect of privatisation pricing for a sub-sample comprising all the bids made between 1998 and 2004. Restraining the overall sample is a direct consequence of the fact that when computing our strategic reference point measure, *privatisation*

premium benchmark, we need to focus only on those listed companies that are involved in privatisation and have market prices available. It is worth noting that 99% of the privatisation transactions took place before 2004.

The results, reported in Table 6, show that parallel control transactions, involving the RPA blocks within the target's industry, are influential in pricing the takeovers. This effect (*privatisation premium benchmark*) complements the pricing effect triggered by the stock market (*52-week high*), which remains highly significant in all models.

The higher the premium paid for within-industry privatisations during the year preceding the bid, the higher the bid premium proposed to minority shareholders. The magnitude of the coefficient estimate ranges between 0.15 and 0.16 (*p*-value < 0.01), which implies that for every 10% increase in the privatisation premium, the bid premium is 1.5%–1.6% higher. As the privatisation is not subject to the MBR, we interpret this result as an indication of the control value, helping the private acquirers to get an insight on the overall scope of expropriation. It is worth mentioning that after controlling for the influence of privatisation phenomenon on the initial takeover premium, the effect of the other variables remains unchanged both in terms of statistical significance and economic magnitude.

## 4.2 | Takeover Success

As far as a bid is not coercive, shareholders of the target are better placed to judge its merits. Compared with existing contributions on the determinants of bid outcome, measured as a dichotomous variable, we explain the actual percentage tendered by remaining shareholders (36.22% on average, in our sample; median 24.67%). The bid outcome is defined in our study as the fraction of the number of tendered shares relative to the number of shares, which are targeted by the offeror,
<table><caption>TABLE 5 | Main determinants of the initial and final acquisition premiums.</caption><thead><tr><th rowspan="2">Independent variable</th><th colspan="3">Initial bid premium</th><th colspan="3">Final bid premium</th></tr><tr><th>(1)</th><th>(2)</th><th>(3)</th><th>(4)</th><th>(5)</th><th>(6)</th></tr></thead><tbody><tr><td>52-Week high</td><td>0.237***<br>(0.000)</td><td>0.243***<br>(0.000)</td><td>0.241***<br>(0.000)</td><td>0.202***<br>(0.000)</td><td>0.207***<br>(0.000)</td><td>0.204***<br>(0.000)</td></tr><tr><td>Direct toehold</td><td>-1.091***<br>(0.000)</td><td>-1.251***<br>(0.000)</td><td></td><td>-1.305***<br>(0.000)</td><td>-1.434***<br>(0.000)</td><td></td></tr><tr><td>(Direct toehold)<sup>2</sup></td><td>1.627***<br>(0.000)</td><td>1.666***<br>(0.000)</td><td></td><td>1.754***<br>(0.000)</td><td>1.785***<br>(0.000)</td><td></td></tr><tr><td>Zero toehold</td><td></td><td></td><td>0.051<br>(0.452)</td><td></td><td></td><td>0.089<br>(0.217)</td></tr><tr><td>Under control toehold</td><td></td><td></td><td></td><td>-0.125**<br>(0.031)</td><td></td><td>-0.163***<br>(0.007)</td></tr><tr><td>Squeeze-out toehold</td><td></td><td></td><td>0.463***<br>(0.000)</td><td></td><td></td><td>0.392***<br>(0.000)</td></tr><tr><td>RPA foothold</td><td></td><td>0.227***<br>(0.000)</td><td>0.201***<br>(0.000)</td><td></td><td>0.187***<br>(0.002)</td><td>0.157***<br>(0.009)</td></tr><tr><td>Concert</td><td>0.185***<br>(0.001)</td><td>0.186***<br>(0.000)</td><td>0.202***<br>(0.000)</td><td>0.190***<br>(0.001)</td><td>0.191***<br>(0.001)</td><td>0.210***<br>(0.000)</td></tr><tr><td>Rival</td><td></td><td></td><td></td><td>0.399***<br>(0.000)</td><td>0.403***<br>(0.000)</td><td>0.440***<br>(0.000)</td></tr><tr><td>Foreign company</td><td>0.202***<br>(0.006)</td><td>0.222***<br>(0.002)</td><td>0.223***<br>(0.002)</td><td>0.213***<br>(0.005)</td><td>0.230***<br>(0.002)</td><td>0.230***<br>(0.002)</td></tr><tr><td>Target size</td><td>-0.232***<br>(0.000)</td><td>-0.227***<br>(0.000)</td><td>-0.227***<br>(0.000)</td><td>-0.260***<br>(0.000)</td><td>-0.255***<br>(0.000)</td><td>-0.254***<br>(0.000)</td></tr><tr><td>Industrial sector</td><td>Yes</td><td>Yes</td><td>Yes</td><td>Yes</td><td>Yes</td><td>Yes</td></tr><tr><td>Bidder type</td><td>Yes</td><td>Yes</td><td>Yes</td><td>Yes</td><td>Yes</td><td>Yes</td></tr><tr><td>Time effects</td><td>Yes</td><td>Yes</td><td>Yes</td><td>Yes</td><td>Yes</td><td>Yes</td></tr><tr><td>Number of observations</td><td>1765</td><td>1765</td><td>1765</td><td>1765</td><td>1765</td><td>1765</td></tr><tr><td>Adjusted R<sup>2</sup></td><td>0.25</td><td>0.26</td><td>0.26</td><td>0.27</td><td>0.28</td><td>0.27</td></tr><tr><td>F-statistic</td><td>21.42</td><td>21.36</td><td>20.62</td><td>23.10</td><td>22.76</td><td>21.77</td></tr></tbody></table>

Note: This table presents the estimation results from OLS regressions using various sets of covariates. The dependent variable is the *initial* (models 1–3) or *final* (models 4–6) acquisition premium computed as the initial/final offer price expressed as a log percentage difference from the target stock price 42 calendar days prior to the SEC approval date. 52-week high is the highest stock price over the last 52 weeks expressed as a log percentage difference from the target stock price 42 calendar days prior to the SEC approval date. Direct toehold is the stake in the target's equity owned by the acquirer at the bid date. Zero toehold is a dummy that takes the value of 1 if the bidder owns no target share. Under control toehold is a dummy that equals 1 if the direct toehold is lower than the legal control threshold. Squeeze-out toehold is a dummy that takes the value of 1 if the bidder has a direct stake higher than the squeeze-out threshold. RPA foothold is a dummy that equals 1 if the bidder bought a stake from the Romanian Privatisation Authority (RPA) before the bid date. Rival is a dummy that equals 1 if a rival offer has been made before the closing date. Concert is a dummy that equals 1 if the bidder acts in concert with other target's shareholders within the takeover bid. Foreign company is a dummy that equals 1 if the bidder is a foreign firm. Target size is the natural logarithm of the target's market capitalisation on day -42. Industrial sector (agriculture; mining and quarrying; manufacturing; metal; construction; tourism; retail; services and transportation), bidder type (individual; firm; institutional investor and group of bidders), time effects and constant are included but not reported. p-values are reported in parenthesis, below each coefficient estimate.

Note:*, ** and * indicate statistical significance at the 1%, 5% and 10% level, respectively.

according to the official takeover document. In the case of a mandatory bid made for all the target outstanding shares, the number of shares making the object of the TOB does not include those already held by the offeror. Here, the definition of bid success is more accurate and highly relevant for the analysed context, where a bidder may buy even a single tendered share or structure a sequence of bids for the same target.

To explain the bid outcome, we estimate generalised linear models (GLMs) of the following form

$$g\{E(\text{Bid outcome} | \mathcal{Y})\} = \beta_0 + \beta_1 \cdot \text{Final premium} \\ + \beta_2 \cdot (52 - \text{Week High ratio}) \\ + \beta_3 \cdot \text{Bid jump} + \xi_n \cdot \text{Vector of controls} \\ + \epsilon_i$$

where the link function g(·) is the logit function and the dependent variable is distributed as binomial. Our modelling choice is a better alternative to ordinary least squares (OLS) regressions because the dependent variable is a proportion that
<table><caption>TABLE 6 | The privatisation premium benchmark as a strategic reference point.</caption><thead><tr><th>Independent variable</th><th>(1)</th><th>(2)</th><th>(3)</th><th>(4)</th><th>(5)</th><th>(6)</th></tr></thead><tbody><tr><td>Privatisation premium benchmark</td><td>0.149**<br>(0.015)</td><td></td><td>0.150**<br>(0.013)</td><td>0.156**<br>(0.012)</td><td></td><td>0.157***<br>(0.009)</td></tr><tr><td>52-Week high</td><td></td><td>0.250***<br>(0.000)</td><td>0.251***<br>(0.000)</td><td></td><td>0.243***<br>(0.000)</td><td>0.244***<br>(0.000)</td></tr><tr><td>Direct toehold</td><td>-1.373***<br>(0.000)</td><td>-1.585***<br>(0.000)</td><td>-1.603***<br>(0.000)</td><td></td><td></td><td></td></tr><tr><td>(Direct toehold)<sup>2</sup></td><td>1.952***<br>(0.000)</td><td>2.198***<br>(0.000)</td><td>2.229***<br>(0.000)</td><td></td><td></td><td></td></tr><tr><td>Zero toehold</td><td></td><td></td><td></td><td>-0.020<br>(0.806)</td><td>0.024<br>(0.771)</td><td>0.019<br>(0.815)</td></tr><tr><td>Under control toehold</td><td></td><td></td><td></td><td>-0.180**<br>(0.012)</td><td>-0.165**<br>(0.019)</td><td>-0.180**<br>(0.011)</td></tr><tr><td>Squeeze-out toehold</td><td></td><td></td><td></td><td>0.510***<br>(0.000)</td><td>0.568***<br>(0.000)</td><td>0.570***<br>(0.000)</td></tr><tr><td>RPA foothold</td><td>0.137**<br>(0.045)</td><td>0.171**<br>(0.011)</td><td>0.166**<br>(0.013)</td><td>0.112*<br>(0.092)</td><td>0.148**<br>(0.024)</td><td>0.142**<br>(0.030)</td></tr><tr><td>Concert</td><td>0.142**<br>(0.033)</td><td>0.149**<br>(0.022)</td><td>0.158**<br>(0.016)</td><td>0.169**<br>(0.012)</td><td>0.179***<br>(0.007)</td><td>0.188***<br>(0.004)</td></tr><tr><td>Foreign company</td><td>0.212**<br>(0.015)</td><td>0.197**<br>(0.021)</td><td>0.212**<br>(0.013)</td><td>0.205**<br>(0.019)</td><td>0.190**<br>(0.027)</td><td>0.204**<br>(0.017)</td></tr><tr><td>Target size</td><td>-0.234***<br>(0.000)</td><td>-0.231***<br>(0.000)</td><td>-0.227***<br>(0.000)</td><td>-0.233***<br>(0.000)</td><td>-0.230***<br>(0.000)</td><td>-0.226***<br>(0.000)</td></tr><tr><td>Bidder type</td><td>Yes</td><td>Yes</td><td>Yes</td><td>Yes</td><td>Yes</td><td>Yes</td></tr><tr><td>Time effects</td><td>Yes</td><td>Yes</td><td>Yes</td><td>Yes</td><td>Yes</td><td>Yes</td></tr><tr><td>Number of observations</td><td>1352</td><td>1352</td><td>1352</td><td>1352</td><td>1352</td><td>1352</td></tr><tr><td>Adjusted R<sup>2</sup></td><td>0.23</td><td>0.26</td><td>0.26</td><td>0.23</td><td>0.25</td><td>0.26</td></tr><tr><td>F-statistic</td><td>23.18</td><td>26.92</td><td>25.93</td><td>21.78</td><td>25.04</td><td>24.23</td></tr></tbody></table>

Note: This table presents the estimation results from OLS regressions using various sets of covariates. The dependent variable is the initial acquisition premium computed as the initial offer price expressed as a log percentage difference from the target stock price 42 calendar days prior to the SEC approval date. *Privatisation premium benchmark* is the average privatisation premium of the privatised firms in the target's industry during a 12-month period before the bid. *52-week high* is the highest stock price over the last 52 weeks expressed as a log percentage difference from the target stock price 42 calendar days prior to the SEC approval date. *Direct toehold* is the stake in the target's equity owned by the acquirer at the bid date. *Zero toehold* is a dummy that takes the value of 1 if the bidder owns no target share. *Under control toehold* is a dummy that equals 1 if the direct toehold is lower than the legal control threshold. *Squeeze-out toehold* is a dummy that takes the value of 1 if the bidder has a direct stake higher than the squeeze-out threshold. *RPA foothold* is a dummy that equals 1 if the bidder bought a stake from the Romanian Privatisation Authority (RPA) before the bid date. *Rival* is a dummy that equals 1 if a rival offer has been made before the closing date. *Concert* is a dummy that equals 1 if the bidder acts in concert with other target's shareholders within the takeover bid. *Foreign company* is a dummy that equals 1 if the bidder is a foreign firm. *Target size* is the natural logarithm of the target's market capitalisation on day -42. *Bidder type* (individual; firm; institutional investor and group of bidders), *time effects* and constant are included but not reported. *p*-values are reported in parenthesis below each coefficient estimate.

Note:***, ** and * indicate statistical significance at the 1%, 5%, and 10% level, respectively.

falls between zero and one. The various GLM models are fit by using maximum likelihood (Newton-Raphson) optimisation routines (see Dobson and Barnett 2008).

Besides the variables already discussed in the previous section, we added four new ones, likely to explain the bid success: 52-week high ratio, defined as the fraction of the final offer price to the highest market price during a 12-month period preceding the bid; bid jump, the ratio of the final to initial acquisition price; period revision, an indicator variable equal to 1 if the bidder postpones the closing without changing the bidding price and 0 otherwise and no trading, an indicator variable which takes the value of 1 if there is no market price available before

the bid date and 0 otherwise. The table in Appendix C provides the definitions of all variables for reference.

Among the main factors that exert a significant influence on the bid outcome, the level of the final premium and bid jump improve the perspective of a bid success, whereas rival offers lead to a decrease in the number of tendered shares. These findings are consistent with the previous literature on well-established markets (Walkling 1985; Betton and Eckbo 2000; Henry 2004; Bates et al. 2006).

As in the previous literature, we control for the bidding strategy by comparing the initial deal attributes and the revised terms.
The change of the initial offer terms before the TOB closing date gives insights on the competition for the control rights by third-party bidders (Betton and Eckbo 2000) or the balance of power between minority and major shareholders, especially in freeze-outs via tender offers (Bates et al. 2006). After controlling for rival bids, increasing the offer price is consistent with greater bargaining power of minority shareholders who are able to extract from acquirers a larger portion of the deal surplus even in the absence of explicit negotiations. In contrast, extending the bid period without increasing the bid price is likely to signal a conflict inherent to entrenched ownership structures. Such an amendment depicts a situation where the remaining shareholders are unwilling to exit for the initial offer price, but they cannot influence the offer terms. The high frequency of bid revisions (more than 300 cases) challenges the presumption of passivity of minority shareholders in some targets, even if no rival arrives. A price auction sequence is recorded in more than 16% of the bids, whereas the acceptance bid period was extended in 11% of individual bid observations.

The larger the gap between the bidding price and the highest market price over a 1-year period before the bid, the higher the tender success. The anchoring effect, captured by the 52-week high ratio, is positive and highly significant. Based on the results reported in Table 7 (models 2 and 3), we are able to compute the average marginal effect (AME) of the 52-week high ratio on the predicted completion rate. On average, holding other variables at their observed values, an increase of 10% in the offer price towards the peak or over it leads to an increase of the effective completion rate by 9.59%-9.90% (p-value < 0.00, two-tailed). Although our result is not directly comparable with the analysis of the takeover outcome performed in Baker et al. (2012), it confirms, however, that the target acceptance is another key variable subject to the anchoring bias.

The size of bidder toehold is another important factor in explaining the deal success. The acquirers with no toehold or toeholds under the control threshold obtain on average 13.18% and 6.82% (p-value < 0.00, two-tailed), respectively, more than those controlling already the target at the bid date. Our computation of the AME also reveals that the completion rate decreases by 24.95% (p-value < 0.00, two-tailed) in the case of squeeze-out offers with respect to increased-in-ownership TOB.

The empirical results presented in this section show that the remaining shareholders facilitate the emergence of novel controlling shareholders and tender more shares to foreign companies, which are perceived to be less likely to engage in existing expropriation schemes. Finally, the positive coefficient of no trading suggests that minority shareholders take the opportunity to finally exit from companies with extreme market illiquidity.

## 4.3 | Robustness Checks

As a robustness check and for the sake of comparability across the models reported in Tables 5 and 6, we rerun all the regressions reported in Table 5 on the same subsample (1998–2004) used to assess the relevance of our strategic reference point measure *privatisation premium benchmark*. The results,

unreported for space reasons, are similar to those reported in Table 5, the magnitude of the 52-week high coefficient ranging between 0.19 and 0.24 (p-value < 0.00).

We also address the effect of equity dilution that target's minority shareholders face before a takeover event. This governance feature is highly relevant for an emerging market because it distinguishes the alternative ways the bidders build up their toehold or reduce the size of the target's free float. Particularly, within the direct privatisation process, the Romanian government used to impose a multi-annual investment agenda to the final buyer. Despite some sporadic press coverage of major privatisation deals, the details of covenants in privatisation contracts have remained unknown to the general public. Nevertheless, anecdotal evidence reveals that such investments became symptomatic of creeping-in strategies. The major shareholder has usually transformed a consented investment into an in-kind contribution and required that new stocks to be issued on its own behalf. Even if the corporate and stock market regulations provide the minority shareholders with the right to re-establish their fractional ownership, those ones rationally wave their non-transferable pre-emptive rights (see Appendix B). Low take-up makes them suffer a severe de facto dilution.

To capture such an influence on bid premium and outcome, we build a new dataset containing the equity events reported to the BSE and RSEC by each target included in our analysis. We collect information on (1) the date of equity change; (2) number of outstanding shares before and after the equity event and (3) face value before and after the equity event. Then, for each equity change performed before the TOB, we manually search information on the description of the equity event as well as on the ex-post ownership structure in the news databases of S.S.I. F., TRADEVILLE and BSE.²² At the bid date, of 1139 unique targets, 709 changed their share capital at least once, which means that the takeover bids included in our analysis were preceded by 1259 equity change events.

Based on the description of equity events, we compound the degree of equity dilution inflicted to minority shareholders. When the equity event triggers a change of the face value of shares, represents a right offering or a stock dividend distribution, the financial dilution is normalised to zero. However, when one of the target shareholders is identified in the announcement as being explicitly affected by the operation,²³ minority shareholders suffer a severe dilution of their rights, which depends on the size of the equity change.²⁴ Thus, the financial dilution for each equity event is computed as the difference between the ex-post free float and ex ante free float divided by the ex ante free float. As the dilution consequences are more severe when the target is involved in several subsequent changes of equity capital, we compound the financial dilution proxy over all equity issues reported before the TOB date as follows:

$$ \text{Financial dilution} = 1 - (100 - d_1) \cdot (100 - d_2) \cdot \dots \cdot (100 - d_k) / 100k $$

where $d_k$ is the dilution engendered by the equity event k and k is the number of equity changes performed before the bid date. The average of the financial dilution inflicted to minority
<table><caption>TABLE 7 | Bid outcome regressions.</caption><thead><tr><th>Independent variable</th><th>(1)</th><th>(2)</th><th>(3)</th><th>(4)</th><th>(5)</th></tr></thead><tbody><tr><td>Final bid premium</td><td>0.074*<br>(0.085)</td><td></td><td></td><td></td><td></td></tr><tr><td>Direct toehold</td><td></td><td>0.494<br>(0.271)</td><td></td><td>0.260<br>(0.549)</td><td></td></tr><tr><td>(Direct toehold)<sup>2</sup></td><td></td><td>-2.377***<br>(0.000)</td><td></td><td>-2.117***<br>(0.000)</td><td></td></tr><tr><td>Zero toehold</td><td></td><td></td><td>0.701***<br>(0.000)</td><td></td><td>0.759***<br>(0.000)</td></tr><tr><td>Under control toehold</td><td></td><td></td><td>0.416***<br>(0.000)</td><td></td><td>0.389***<br>(0.001)</td></tr><tr><td>Squeeze-out toehold</td><td></td><td></td><td>-1.231***<br>(0.000)</td><td></td><td>-1.198***<br>(0.000)</td></tr><tr><td>52-Week high ratio</td><td></td><td>0.065***<br>(0.001)</td><td>0.062***<br>(0.002)</td><td></td><td></td></tr><tr><td>No trading</td><td></td><td></td><td></td><td>0.768***<br>(0.000)</td><td>0.686***<br>(0.000)</td></tr><tr><td>Bid jump</td><td>0.092**<br>(0.027)</td><td>0.055**<br>(0.047)</td><td>0.054*<br>(0.054)</td><td>0.084**<br>(0.019)</td><td>0.081**<br>(0.024)</td></tr><tr><td>Period revision</td><td>-0.253*<br>(0.078)</td><td>-0.362**<br>(0.013)</td><td>-0.362**<br>(0.012)</td><td>-0.392***<br>(0.006)</td><td>-0.399***<br>(0.005)</td></tr><tr><td>Rival</td><td>-0.822***<br>(0.000)</td><td>-1.127***<br>(0.000)</td><td>-1.126***<br>(0.000)</td><td>-1.156***<br>(0.000)</td><td>-1.160***<br>(0.000)</td></tr><tr><td>Foreign company</td><td>0.356***<br>(0.000)</td><td>0.593***<br>(0.000)</td><td>0.595***<br>(0.000)</td><td>0.581***<br>(0.000)</td><td>0.583***<br>(0.000)</td></tr><tr><td>Bidder type</td><td>Yes</td><td>Yes</td><td>Yes</td><td>Yes</td><td>Yes</td></tr><tr><td>Time effects</td><td>Yes</td><td>Yes</td><td>Yes</td><td>Yes</td><td>Yes</td></tr><tr><td>Number of observations</td><td>1352</td><td>1369</td><td>1369</td><td>1456</td><td>1456</td></tr><tr><td>Log-likelihood</td><td>-728.4</td><td>-704.8</td><td>-705.5</td><td>-749.2</td><td>-749.1</td></tr><tr><td>Chi<sup>2</sup></td><td>69.5</td><td>255.1</td><td>252.4</td><td>291.1</td><td>296.8</td></tr><tr><td>AIC</td><td>1871.6</td><td>1843.5</td><td>1828.7</td><td>1940.0</td><td>1922.4</td></tr><tr><td>BIC</td><td>1992.1</td><td>1975.1</td><td>1965.8</td><td>2072.8</td><td>2060.7</td></tr><tr><td>Dispersion (scaled)</td><td>0.598</td><td>0.572</td><td>0.563</td><td>0.577</td><td>0.567</td></tr><tr><td>Pearson dispersion</td><td>0.529</td><td>0.508</td><td>0.495</td><td>0.516</td><td>0.502</td></tr></tbody></table>

Note: This table presents the estimation results from generalised linear model (GLM) regressions using various sets of covariates. The dependent variable, bid outcome, is the effective completion rate stated in the official closing report. The final bid premium is computed as the final offer price expressed as a log percentage difference from the target stock price 42 calendar days prior to the SEC approval date. Direct toehold is the stake in the target's equity owned by the acquirer at the bid date. Zero toehold is a dummy that takes the value of 1 if the bidder owns no target share. Under control toehold is a dummy that equals 1 if the direct toehold is lower than the legal control threshold. Squeeze-out toehold is a dummy that takes the value of 1 if the bidder has a direct stake higher than the squeeze-out threshold. 52-week high ratio is the ratio of the final offer price to the highest market price during a 12-month period preceding the bid. No trading is a dummy variable that equals 1 if the stocks of target have never been traded before the bid. Bid jump is the percentage change from the initial offer price to the final offer price. Rival is a dummy that equals 1 if a rival offer has been made before the closing date. Period revision is a dummy that equals 1 if the bid period was extended at least once without changing the bidding price. Foreign company is a dummy that equals 1 if the bidder is a foreign firm. Bidder type (individual; firm; institutional investor and group of bidders), time effects and constant are included, but not reported, as indicated. The various GLM models (distribution family = binomial; link function = logit) are fit by using maximum likelihood (Newton-Raphson) optimisation routines. p-values are reported in parenthesis, below each coefficient estimate.

Note:***, ** and * indicate statistical significance at the 1%, 5%, and 10% level, respectively.

shareholders of the targets involved in equity events before the TOB is 23.24%.

If a controlling shareholder seeks to reinforce the control at the expense of minority shareholders, we should observe a negative

correlation between the takeover premium and our proxy for financial dilution. On the contrary, as any sale of controlling stake is not feasible unless the new rider compensates the incentives for the loss of private benefits of control, the financial dilution should lead to an increase in the price of a mandatory
TOB. However, as argued by Faccio and Stolin (2006) and Atanasov et al. (2010), the scope of expropriation may induce an ex ante pricing adjustment that depresses the value at which the minority stakes are bought in the first place. Thus, the controlling shareholder's opportunistic behaviour should be already factored into the valuation of public companies and the size of expected returns. In such a case, there is no additional influence besides that already captured by the market price references.

The proxy for financial dilution is not statistically significant in any of the regressions explaining the takeover premium and controlling for such an influence does not change the reported results. We find a positive and significant coefficient for financial dilution (0.364, p-value < 0.05) only in the regression of bid outcome, when the effect of initial ownership of bidders is neglected.

## 5 | Conclusion

This article documents the anchoring phenomenon in an emerging market for corporate control where MBR applies. Our empirical analysis reveals a novel reference point, derived from the institutional context at hand, which has a meaningful impact on bid pricing.

We examine the size of the bid premium and outcome by covering the entire takeover contest involving the Romanian public companies over a nearly 20-year period. The Romanian market for corporate control is well suited to investigate the role of reference points and anchoring biases in conjunction with takeover regulation at least for two reasons. First, the corporate structures of public companies are dominated by large shareholders, who are more likely to extract private benefits of control. The protection of minority shareholders in blockholder regimes is mainly ensured by the pricing mechanism of corporate control transactions. Particularly, investors who want to control a listed company must make a bid for *all* outstanding shares of the offeree company and pay a *non-discriminatory* price to incumbents and minority shareholders. Second, the Romanian market for corporate control provides a unique opportunity to assess the contribution of novel mechanisms likely to lessen the burden of the MBR, such as privatisation deals.

Our empirical findings reveal that specific governance rules targeting disclosure and capital market discipline are at least as important as the legal details of takeover regulation for insuring an effective protection of minority shareholders. Higher premiums are obtained, indeed, when the market price captures a larger portion of the expected net value creation. Consistent with the positive response to reference points documented in prior the United States and international markets studies, we find that a 10% increase in the target's 52-week high leads to an extra offer premium for the target shareholders of 2.0%-3.2%.

The pricing of control transactions that are not subject to the MBR, namely privatisation deals performed outside the market structures, is also found to play a significant role as an anchor. Documenting such a link was possible due to the uniqueness of the natural experiment of privatisation that involved the

remaining government stakes in public companies. A 10% increase in the average privatisation premium for companies operating in the same industry as the target's leads to an extra offer premium of 1.5%, in addition to the increase triggered by the general reference price.

Our empirical evidence stresses that the minority shareholders take into account not only traditional market benchmarks but also various institutional features, when they are facing takeover attempts. The protection is enhanced precisely when the unconstrained tender decisions are able to protect minority shareholders from opportunistic incumbent blockholders acting as acquirers. Burkart et al. (1998), for instance, point out that acquirers would never voluntarily choose to exceed the minimum control threshold because, at this level, the extraction of private benefits at the expense of the minority shareholders is at its maximum. Yet, we find in our particular setting that controlling shareholders are in fact aggressive bidders. One policy implication for takeover regulation is the introduction of measures that reduce the flexibility of large shareholders to structure multiple acquisitions for the same target or to reinforce their controlling position.

To take just a few examples, the “majority of minority” condition should be applied to any takeover made by a shareholder that already controls the company. In such cases, the bid would fail if less than a half of the minority shareholdings were tendered. Another legitimate inquiry is whether additional intermediate thresholds enhancing the power of a controlling shareholder (for instance, the voting power necessary to cancel the pre-emptive rights) should become subject to MBR. More stringent *anti-creeper provisions* should, in our view, cover the open market transactions by limiting further increases in the acquirer's holdings within a specified time frame after the closing of a bid. Finally, investigating the behaviour of target price after the introduction of the *fair price provision* into domestic regulation, as well as the market transactions made by acquirers and other insiders before the TOB and after the offer period expires, constitutes promising avenues for future research.

## Acknowledgements

The authors thank the Managing Editor (Valeriya Dinger) and the anonymous referee for constructive comments on the early version of this paper. In addition, without implicating them in any way, we are grateful to Azizjon Alimov, Eric de Bodt, Paul Frentrop, Marc Goergen and participants at the first Academic Conference of the International Corporate Governance Network, 26th Annual Conference of the Asian Finance Association, sixth International Conference of the International Finance and Banking Society, fifth International Conference of the Financial Engineering and Banking Society, second Young Finance Scholar Conference, 33rd International Symposium on Money, Banking and Finance, sixth ERMAS Conference, Research Seminars of LSMRC and University of Lille for useful comments and suggestions; the Romanian Privatisation Authority, the Romanian Securities Exchange Commission, Tradeville and the Romanian Universe for helping with data. Previous unpublished preliminary versions of the current article circulated under the titles “How fair are the fair price standards in blockholder regimes” and “Takeover Bids' Profile under Mandatory Bid Rule: Evidence from an Emerging Market.” D. Pop gratefully acknowledges financial support from the Rules and Markets Chaire—GRANEM of the University of Angers and PANORisk.
## Disclosure

The authors have no relevant financial or non-financial interests to disclose.

## Conflicts of Interest

The authors declare that they have no conflicts of interest or personal relationships that could have appeared to influence the work reported in this paper.

## Data Availability Statement

The data that support the findings of this study are available from the corresponding author upon request.

## Endnotes

## References

Alexandridis, G., D. Petmezas, and N. Travlos. 2010. "Gains From Mergers and Acquisitions Around the World: New Evidence." *Financial Management* 394, no. 4: 1671–1695, https://doi.org/10.1111/j.1755-053x.2010.01126.x.

<footnote n="1">¹ The control is usually defined with respect to the 30% threshold of the voting rights.</footnote>

<footnote n="2">² As explained in Bebchuk (1994), the rule that governs the sale of control where the offeror and the incumbent may negotiate the control block at any price, without including the minority shareholders into the deal, is called generically “Market Rule.” As, in reality, there is no legal constraint applied to such control transactions, a more appropriate term should be “No Rule” on the takeover market.</footnote>

<footnote n="3">³ See, Directive 2004/25/EC of the European Parliament and of the Council of April 21, 2004, on takeover bids.</footnote>

<footnote n="4">⁴ After 2017, the takeover bids became sporadic: 16 in 2018; 13 in 2019; 15 in 2020; 7 in 2021 and 1 in 2022.</footnote>

<footnote n="5">⁵ De la Bruslerie (2013) addresses the strategy of an implicit partial bidding when the MBR applies, both from the perspective of bidders, who do not necessarily want to end up with full ownership, and minority shareholders, who rationally take into account the future rate of private appropriation.</footnote>

<footnote n="6">⁶ Netter et al. (2011) shows that sampling criteria based on the size of bid, listing status of target and nature of transactions can drive misleading inferences about the nature of the M&A phenomenon.</footnote>

<footnote n="7">⁷ According to the vernacular of Tversky and Kahneman (1974), the term “anchoring” refers to the tendency of individuals to cognitively assign greater importance to an initial value, which is subsequently adjusted to determine the final outcome. Anchoring is one of the three major heuristics or biases that humans use in the processes of judgement and decision-making. The two others are the “representativeness” heuristic (the tendency to rely on an item because it is highly representative) and the “availability” heuristic (the tendency to rely on events that are easily brought to mind).</footnote>

<footnote n="8">⁸ Comment and Schwert (1995), Rossi and Volpin (2004), Anderson et al. (2009), Marshall and Anderson (2009), Alexandridis et al. (2010), and Croci and Petmezas (2010) document that the targets enjoying strong legal protection receive higher takeover premiums than those evolving in a poor governance landscape. A stronger investor protection also leads to lower private benefits of control and higher levels of pledgeable incomes (Burkart et al. 2014).</footnote>

<footnote n="9">⁹ From 1995 to 2004, an offeror aiming to acquire a controlling position (33%) without exceeding the majority position (50%) had been allowed to make a partial bid and to allocate the tendered shares on a pro-rata basis if the offer was oversubscribed.</footnote>

<footnote n="10">¹⁰ The information related to share and control structures is addressed mainly by the EU Transparency Directive (pre-bid general disclosure).</footnote>

<footnote n="11">¹¹ In 1995, the Romanian government decided to transfer to all adult citizens for free either 40% or 60% of the share capital in almost 6000 companies. Nevertheless, at the end of the underwriting period, many</footnote>

<footnote>of those blocks were only partially transferred to private shareholders. The unsolicited stakes were included back into the government portfolio.</footnote>

<footnote n="12">¹² According to the national regulation, any shareholder whose ownership exceeds 5% (10%, beginning with 2002).</footnote>

<footnote n="13">¹³ In 1998, the RPA published in the Official Journal the offer-program of privatisation including its remaining stakes, the selling method (direct negotiation, auction and public offer) and the month of privatisation for a list of 2745 companies grouped by industrial sector. However, the engagement for keeping this rhythm of privatisation was not finally fulfilled. Anecdotal evidence reveals that some companies were privatised almost a decade afterwards.</footnote>

<footnote n="14">¹⁴ None of our sources of information provides full coverage of the takeover contests over the entire sample period. For instance, we use a keyword search within the weekly official bulletins of the RSEC, which are available beginning with 2003, to identify all approval decisions and amendments of the bid terms. The BSE electronic summaries include the final terms of the bids made after 2005, whereas the BSE repository is used on a regular basis for filing the closing reports after 2006 and the full takeover documents, especially after 2011. We handled all these files one by one.</footnote>

<footnote n="15">¹⁵ Replacing the RSEC approval date by the first of the two following dates: (1) the date of the preliminary announcement of a bid and (2) the date the market trades with the target shares are suspended by the RSEC does not change our main results. Such an information is available only for a short period when the takeover regulation imposed the publication of a preliminary announcement, especially before the voluntary bids.</footnote>

<footnote n="16">¹⁶ Extending the period to 52 weeks with respect to the RSEC approval date is motivated by the regulation that requires the bidder to update the offer price in order to express any transaction performed with the target shares, even after filing the takeover document with the RSEC.</footnote>

<footnote n="17">¹⁷ The acquirers should incorporate in their own valuation the information about this reference price before asking for the approval by the RSEC. We assume that a reasonable period for the conformity assessment of the offer document by the RSEC lasts 2 weeks.</footnote>

<footnote n="18">¹⁸ The reader can refer to Betton et al. (2008) for a comprehensive review.</footnote>

<footnote n="19">¹⁹ The legal control threshold triggering an MBR was 50% before June 29%, 2004% and 33% afterwards.</footnote>

<footnote n="20">²⁰ The squeeze-out threshold was 90% before June 29%, 2004% and 95% afterwards.</footnote>

<footnote n="21">²¹ Loureiro and Silva (2023) refine this variable by considering the country of bidder and quality of corporate governance in order to test whether the implementation of the EU Takeover Directive led to value-enhancing deals.</footnote>

<footnote n="22">²² After 2005, a more detailed description of equity events became also available in the official reports of the BSE.</footnote>

<footnote n="23">²³ Usually, the major shareholder or the RPA.</footnote>

<footnote n="24">²⁴ If the announcement before the equity issue indicates a cum-right date for all shareholders whilst there is no available information on the beneficial owners, we ignore the partial dilution of minority shareholders arising when those participating in the equity offering have an “oversubscription privilege.” Detailed reports about the number of shares subscribed and cancelled with respect to the number of shares issued in exchange for cash needed for restoring the position of minority shareholders can be collected only for the second half of the analysed period.</footnote>
Anderson, H., B. Marshall, and R. Wales. 2009. "What Is the Relation-
ship Between Investor Protection Legislation and Takeover Returns?
Evidence From Europe." *Journal of Multinational Financial Manage-
ment* 19, no. 4: 291–305, https://doi.org/10.1016/j.mulfin.2009.02.002.

Ang, J., and A. Ismail. 2015. “What Premiums Do Target Shareholders Expect? Explaining Negative Returns Upon Offer Announcements.” *Journal of Corporate Finance* 30: 245–256, https://doi.org/10.1016/j.jcorpfin.2014.12.015.

Atanasov, V., S. Ciccotello, and S. Gyoshev. 2010. "How Does Law Affect Finance? An Examination of Equity Tunneling in Bulgaria." *Journal of Financial Economics* 96, no. 1: 155-173, https://doi.org/10.1016/j.jfineco.2009.12.005.

Baker, M., X. Pan, and J. Wurgler. 2012. "The Effect of Reference Point Prices on Mergers and Acquisitions." *Journal of Financial Economics* 106, no. 1: 49–71, https://doi.org/10.1016/j.jfineco.2012.04.010.

Bates, T., M. Lemon, and J. Linck. 2006. "Shareholder Wealth Effects and Bid Negotiation in Freeze-Out Deals: Are Minority Shareholders Left Out in the Cold?" *Journal of Financial Economics* 81, no. 3: 681–708, https://doi.org/10.1016/j.jfineco.2005.07.009.

Bebchuk, L. 1994. "Efficient and Inefficient Sales of Corporate Control." *Quarterly Journal of Economics* 109, no. 4: 957–993, https://doi.org/10.2307/2118353.

Bebchuk, L., A. Cohen, and C. Wang. 2013. "Learning and the Dis-
appearing Association Between Governance and Returns." *Journal of
Financial Economics* 108, no. 2: 323–348, https://doi.org/10.1016/j.
jfineco.2012.10.004.

Berglöf, E., and A. Pajuste. 2003. "Emerging Owners, Eclipsing Markets: Corporate Governance in Transition." In *Corporate Governance and Capital Flows in a Global Economy*, edited by P. Cornelius and K. Bruce (Eds), 267–304. Oxford University Press.

Betton, S., and E. Eckbo. 2000. "Toeholds, Bid Jumps and Expected Payoffs in Takeovers." *Review of Financial Studies* 13, no. 4: 841–882, https://doi.org/10.1093/rfs/13.4.841.

Betton, S., E. Eckbo, and K. Thorburn. 2008. "Corporate Takeovers." In *Handbook of Empirical Corporate Finance*, edited by B. Espen Eckbo (Ed) Vol. 2, 291–429. Elsevier. https://doi.org/10.1016/b978-0-444-53265-7-50007-x.

Betton, S., E. Eckbo, and K. Thorburn. 2009. "Merger Negotiations and the Toehold Puzzle." *Journal of Financial Economics* 91: 158–178.

Betton, S., E. Eckbo, and K. Thorburn. 2014. "Merger Negotiations With Stock Market Feedback." *Journal of Finance* 69: 1705-1745.

Billet, M., and M. Ryngaert. 1997. "Capital Structure, Asset Structure and Equity Takeover Premium in Cash Tender Offers." *Journal of Corporate Finance* 3, no. 2: 141–165, https://doi.org/10.1016/s0929-1199 (96)00011-9.

Burkart, M., D. Gromb, H. M. Mueller, and F. Panunzi. 2014. "Legal Investor Protection and Takeovers." *Journal of Finance* 69, no. 3: 1129–1165, https://doi.org/10.1111/jofi.12142.

Burkart, M., D. Gromb, and F. Panunzi. 1998. "Why Takeover Premia Protect Minority Shareholders." *Journal of Political Economy* 106: 647–677.

Burkart, M., D. Gromb, and F. Panunzi. 2006. "Minority Blocks and Takeover Premia." *Journal of Institutional and Theoretical Economics* 162: 1–18, https://doi.org/10.1628/093245606776166534.

Chemla, G., A. Pop, and D. Pop. 2010. "Privatization and Governance Regulation in Frontier Emerging Markets: The Case of Romania." In *Financial Institutions and Markets, Vol. 3, the Financial Crisis: An Early Retrospective*, edited by R. Bliss and G. Kaufman (Eds), 205–224. Palgrave Macmillan.

Chiara, I., L. Garcia-Feijo, and J. Madura. 2018. "Use of Reference Points Theory to Explain the Price Paid for Private Targets." *Review of Quantitative Finance and Accounting*: 1–27.

Chiara, I., and J. Madura. 2015. "Reference Point Theory and Pursuit of Deals." *Financial Review* 50, no. 3: 275–300, https://doi.org/10.1111/fire.12067.

Comment, R., and G. Schwert. 1995. "Poison or Placebo? Evidence on the Deterrent and Wealth Effects of Modern Antitakeover Measures." *Journal of Financial Economics* 39, no. 1: 3–43, https://doi.org/10.1016/0304-405x(94)00823-j.

Croci, E., and D. Petmezas. 2010. "Minority Shareholders' Wealth Effects and Stock Market Development: Evidence From Increase-In Ownership M&A." *Journal of Banking & Finance* 34: 681–694.

De la Bruslerie, H. 2013. "Equal Opportunity Rule vs. Market Rule in Transfer of Control: How Can Private Benefits Help to Provide an Answer?" *Journal of Corporate Finance* 23: 88–107, https://doi.org/10.1016/j.jcorpfin.2013.07.007.

Dobson, A., and A. Barnett. 2008. *An Introduction to Generalized Linear Models*. 3rd ed. Chapman & Hall/CRC.

Eckbo, E. 2009. "Bidding Strategies and Takeover Premiums: A Review." *Journal of Corporate Finance* 15, no. 1: 149–178, https://doi.org/10.1016/j.jcorpfin.2008.09.016.

Faccio, M., and D. Stolin. 2006. "Expropriation vs. Proportional Sharing in Corporate Acquisitions." *Journal of Business* 793, no. 3: 1413–1444, https://doi.org/10.1086/500680.

Fishman, M. 1988. "A Theory of Preemptive Takeover Bidding." *RAND Journal of Economics* 19, no. 1: 88-101, https://doi.org/10.2307/2555399.

Gorbenko, A., and A. Malenko. 2014. "Strategic and Financial Bidders in Takeover Auctions." *Journal of Finance* 69, no. 6: 2513-2555, https://doi.org/10.1111/jofi.12194.

Guo, J., X. Li, N. Seeger, and E. Vagenas-Nanos. 2019. "Social Connections, Reference Point and Acquisition Premium." *British Accounting Review* 51, no. 1: 46–71, https://doi.org/10.1016/j.bar.2018.07.001.

Henry, D. 2004. "Corporate Governance and Ownership Structure of Target Companies and the Outcome of Takeovers." *Pacific-Basin Finance Journal* 12, no. 4: 419-444, https://doi.org/10.1016/j.pacfin.2003.09.004.

Loureiro, G., and S. Silva. 2023. "The Wealth Effects of Takeover Bids Regulation in the European Union." *European Financial Management* 29, no. 3: 692–733, https://doi.org/10.1111/eufm.12383.

Ma, M., D. Whidbee, and W. Zhang. 2019. "Acquirer Reference Prices and Acquisition Performance." *Journal of Financial Economics* 132, no. 1: 175-199, https://doi.org/10.1016/j.jfineco.2018.10.004.

Marshall, B., and H. Anderson. 2009. "Regulation and Target Takeover Returns: Is There a Link?" *Pacific-Basin Finance Journal* 17, no. 4: 395-412, https://doi.org/10.1016/j.pacfin.2008.10.002.

Netter, J., M. Stegemoller, and M. Wintoki. 2011. "Implications of Data Screens on Merger and Acquisition Analysis: A Large Sample Study of Mergers and Acquisitions From 1992 to 2009." *Review of Financial Studies* 24, no. 7: 2242-2285, https://doi.org/10.1093/rfs/hhr010.

Pop, D. 2006. "M&A Market in Transition Economies: Evidence From Romania." *Emerging Markets Review* 7: 244-260.

Rossi, S., and P. Volpin. 2004. "Cross Country Determinants of Mergers and Acquisitions." *Journal of Financial Economics* 74, no. 2: 227-304, https://doi.org/10.1016/j.jfineco.2003.10.001.

Schuster, E. 2013. "The Mandatory Bid Rule: Efficient, After All?" *Modern Law Review* 76, no. 3: 529-563, https://doi.org/10.1111/1468-2230.12023.

Shleifer, A., and R. Vishny. 1986. "Large Shareholders and Corporate Control." *Journal of Political Economy* 94, no. 3, Part 1: 461-488, https://doi.org/10.1086/261385.
Smith, G., J. Coy, and A. Spieler. 2019. "Cross-border Transactions, Mergers and the Inconsistency of International Reference Points." *Journal of Behavioral and Experimental Finance* 22: 14-21, https://doi.org/10.1016/j.jbef.2019.01.001.

Suzuki, K. 2018. "Estimating Private Benefits of Control From Stock Changes Around the Announcement of Tender Offer Bid (TOB)." *Public Policy Review* 11: 411-426.

Suzuki, K., and T. Kruse. 2010. "Two Decades of Development of Tender Offer Market in Japan: An Analysis of Regulatory Changes, Offer Premiums, and Share Price Reactions." In *USJP Occasional Paper 10-11 Program on US-Japan Relations*. Harvard University. http://dx.doi.org/10.2139/ssrn.1572117.

Thomsen, S., and F. Vinten. 2014. "Delisting and the Cost of Governance: A Study of European Stock-Exchanges 1996-2004." *Journal of Management & Governance* 18, no. 3: 793-833, https://doi.org/10.1007/s10997-013-9256-7.

Tversky, A., and D. Kahneman. 1974. "Judgment Under Uncertainty: Heuristics and Biases." *Science* 185, no. 4157: 1124-1131, https://doi.org/10.1126/science.185.4157.1124.

Walkling, R. 1985. "Predicting Tender Offer Success: A Logistic Analysis." *Journal of Financial and Quantitative Analysis* 20, no. 4: 461-478, https://doi.org/10.2307/2330762.

Wang, Y., and H. Lahr. 2017. "Takeover Law to Protect Shareholders: Increasing Efficiency or Merely Redistributing Gains?" *Journal of Corporate Finance* 43: 288-315, https://doi.org/10.1016/j.jcorpfin.2017.01.007.

## Supporting Information

Additional supporting information can be found online in the Supporting Information section.
Appendix A: Time-Table and Description of the Main Regulatory
Events Concerning Takeover Bids Involving Listed Companies

<table><caption>TABLE A1 | Mandatory bid rule.</caption><thead><tr><th>Legal indicator</th><th>Takeover Reg. #16</th><th>OUG #28</th><th>Market Law #525</th><th>Instruction #1</th><th>OUG #122<br>04/<br>05/<br>08/02</th><th>OUG #165<br>30/<br>10/<br>02</th><th>Takeover Reg. #5</th><th>Market Law #297</th><th>Market Reg. #13</th><th>Securities Reg. #1</th><th>OUG #32<br>11/<br>07/<br>12</th><th>Market Law #268<br>19/<br>11/15</th></tr></thead><tbody><tr><td>Date</td><td>01/01/95</td><td>09/04/02</td><td></td><td></td><td>25/09/02</td><td>02</td><td>09/08/03</td><td>29/06/04</td><td>01/<br>07/05</td><td>07/04/06</td><td></td><td></td></tr><tr><td>MBR threshold</td><td></td><td></td><td></td><td>50%</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td>33%</td></tr><tr><td>Excepted transactions</td><td>NA</td><td></td><td>Privatisation and acquisition of stocks from the Ministry of finance</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Rival offers</td><td>NA</td><td></td><td>Bankruptcy</td><td>NA</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td></td><td></td><td></td><td>At least for the same number of shares</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td></td><td></td><td></td><td>At a price at least 5% higher than the price of the first bid</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td></td><td></td><td></td><td>To be filed with the RSEC within the 10 transaction days following the beginning date of the first bid</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td></td><td></td><td></td><td>The RSEC decides a single closing date for all rival bids.</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Restrictions on the bidder's actions</td><td>NA</td><td></td><td>To make a bid within 20 days after the preliminary announcement</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td></td><td></td><td></td><td>To make any subsequent offer within the 12 months after the closing date of the previous bid</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr></tbody></table>

(Continues)
<table><caption>TABLE A1 | (Continued)</caption><thead><tr><th>Legal indicator</th><th>Takeover Reg. #16</th><th>OUG #28</th><th>Market Law #525</th><th>Instruction #1</th><th>OUG #122 04/10/02</th><th>OUG #165 30/11/02</th><th>Takeover Reg. #5</th><th>Market Law #297</th><th>Market Reg. #13</th><th>Securities Reg. #1</th><th>OUG #32 11/07/12</th><th>Market Law #268 19/11/15</th></tr><tr><th>Date</th><th>01/01/95</th><th>09/04/02</th><th>05/08/02</th><th>25/09/02</th><th></th><th></th><th>09/08/03</th><th>29/06/04</th><th>01/07/05</th><th>07/04/06</th><th></th><th></th></tr></thead><tbody><tr><td>Minimum price condition</td><td>NA</td><td>Based on the RSEC regulation</td><td></td><td>NA</td><td></td><td></td><td>(a) Max of (1) the price paid by the offeror or any person acting in concert with him and (2) the WAMP during the 12 months preceding the bid<br/>(b) If no reference price mentioned at (a) is available, the bidding price is based on the adjusted NAV</td><td>(a) The price paid by the offeror for the target shares during the 12 months preceding the bid<br/>(b) If (a) is not available based on: (1) the WAMP over the last 12 months preceding the bidding period; (2) the NAV according to the most recent audited financial statement and (3) the value assessed by an independent expert based on the IAS</td><td>(a) The highest price paid by the offeror or the persons acting in concert with the offeror for the target shares during the 12 months preceding the date the bid is filed with the RSEC, unless the RSEC concludes that those transactions affect the fairness of the bidding price<br/>(b) If this reference price is not available, the bidding price assessed by an independent expert should be at least equal to the maximum of: (1) the WAMP over the 12 months (*) starting with 11/07/12 (OUG #32), if the above conditions cannot be met, the bidding price is at least equal to the highest price among the same, for price references established 12 months before the acquisition of the controlling position (33%) preceding the date the bid is filed with the RSEC; (2) the NAV according to the last available financial report; and (3) the value assessed based on the IAS</td><td></td><td></td><td></td><td></td></tr></tbody></table>
<table><caption>TABLE A2 (Continued)</caption><thead><tr><th>Legal indicator</th><th>Takeover Reg. #16</th><th>OUG #28</th><th>Market Law #525</th><th>Instruction #1</th><th>OUG #122</th><th>OUG #165</th><th>Takeover Reg. #5</th><th>Market Law #297</th><th>Market Reg. #13</th><th>Securities Reg. #1</th><th>OUG #32</th><th>Market Law #268</th></tr></thead><tbody><tr><td>Date</td><td>01/01/95</td><td>09/04/02</td><td>05/08/02</td><td>25/09/02</td><td>04/10/02</td><td>30/11/02</td><td>09/08/03</td><td>29/06/04</td><td>01/07/05</td><td>07/04/06</td><td>11/07/12</td><td>19/11/15</td></tr><tr><td>Rights of minorities</td><td>NA</td><td></td><td>The shareholders owning at least 5% of the targeted shares can contest the bidding price within the 10 days after the report date (at least 90 days before the bidding period) and hire a second expert to set a new price</td><td></td><td></td><td></td><td>The shareholders owning at least 75% of the targeted shares can contest the bidding price within the 10 days after the announcement date (at least 30 days before the bidding period) and hire a second expert to set a new price</td><td>The shareholders owning at least 75% of the targeted shares can contest the bid price within 10 days after the announcement (at least 30 days before the offer period) and hire a second expert to set a new price</td><td>The sell-out right at 95% of the outstanding shares at the fair price</td><td></td><td></td><td></td><td>The individual sell-out right at 95% of the total shares of the company at a fair price</td></tr><tr><td>Resolution of contested buy-out bids</td><td>NA</td><td></td><td>If the price assessed by the expert of the contesting shareholders exceeds: (a) By less than 20% the offeror's price, the bid price is the average of the two prices set by the experts of offeror and contesting shareholders<br>(b) By more than 20% the offeror's price, the bid price is assessed by a third expert hired by offeror and contesting shareholders</td><td>The third expert reconciles the conclusions of the 2 experts hired by offeror and contesting shareholders, respectively</td><td></td><td>If the price assessed by the expert of contesting shareholders exceeds: (a) By less than 20% the offeror's price, the bid price is equal to the average of the two prices set by the 2 experts representing the offeror and contesting shareholders, respectively</td><td>NA</td><td></td><td></td><td></td><td></td><td>The minority shareholders are obliged to sell their shares at the fair price to a major shareholder having a squeeze-out right</td></tr><tr><td>Exceptions to the rules</td><td>NA</td><td></td><td>The obligation to buy-out the minority shareholders does not concern the government owning at least 90% of the outstanding shares</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td>NA</td></tr></tbody></table>

**Abbreviations:** AMP – average market price; ESM – Extraordinary Shareholders' Meeting; GSM – General Shareholders' Meeting; IAS – International Accounting Standards; NAV – net assets value; ROL – Romanian Leu before the monetary reform of July 2005 (1 RON = 10 k ROL); RSEC – Romanian Securities and Exchange Commission and WAMP – weighted average market price.

**Abbreviations:** Reg. – regulation.
# Appendix B: Financial Media Coverage of Equity Events Related to Privatisation Agreements

## Excerpt from the "Bursa" newspaper (June 21, 1999)

The share capital of Romcif increases by ROL 9,674bn from ROL 116,822bn to ROL 126,496bn underwritten and paid-in by Tagrimpex for the investments made according to the privatisation contract. After the capital increase, Tagrimpex holds 53.18% of the share capital.

NB: Romcif was privatised on December 16, 1996; the RPA sold 51% to Tagrimpex and Employees' Association, which both acted in concert at the privatisation date.

## Excerpt from the "Ziarul Financiar" newspaper (February 15, 2001)

The turnover and sales of the concrete producer Romcif prove that, from a commercial point of view, the company is sound. Nevertheless, some concerns may affect the company's prospects. Last year, Romcif reported a turnover of ROL 700bn, namely an 18% increase compared to 1999, but it has been struggling for more than a year to close two equity increases launched in 2000. The first capital increase, amounting to ROL 1.2bn, represents the contribution of the major shareholder, Tagrimpex, made according to the privatisation contract. The second equity increase, amounting to ROL 14bn, is done by respecting the pre-emptive rights of minority shareholders. The first equity increase has not yet been approved by the RSEC, raising two major concerns: the second increase cannot be closed and the shareholders cannot receive the subscribed shares. [...] What causes the delay of the first equity issue is the contested way it had been made. The first equity issue was performed based on the GSM decision made on March 27, 1997, that is, 3 years later, which could raise a problem. Another awkward issue is that this operation was made, according to the representatives of Romcif, in line with the privatisation contract and a formal agreement signed between Romcif and Tagrimpex, that is, between the company and its major shareholder.

## Excerpt from the "Bursa" newspaper (March 26, 2001)

Amep American Packaging Tecuci will buy back around 4% of its outstanding shares. The increase of share capital by ROL 23.98bn has been voted last week, representing the conversion of the claims of the major shareholder (ROL 14,136bn) and a cash contribution of ROL 9,848bn. Consequently, Pol Am Pack Poland has 94.62% of the ownership rights and Broadhurst Investments Ltd has 2.15%. The shareholders recorded on March 16, 2001, except the majority shareholder, have a pre-emptive right to underwrite 1,806,395 new shares at a selling price of ROL 1000/share. Besides, it has already been approved that the increase of the share capital following an in-kind contribution by Pol Am Pack Poland according to the investment plan for the current year agreed in the privatisation contract. The in-kind contribution consists of three types of industrial equipment having a total value of USD 1.11 m.

# Appendix C: Definition of Variables

## Dependent variables

<table><tr><td>Initial acquisition premium</td><td>The log percentage difference between the initial offer price and the target stock price 42 calendar days prior to the RSEC approval date</td></tr><tr><td>Final acquisition premium</td><td>The log percentage difference between the final offer price and the target stock price 42 calendar days prior to the RSEC approval date</td></tr><tr><td>Bid outcome</td><td>The number of tendered shares relative to the number of shares, which are targeted by the offeror, according to the official takeover document</td></tr></table>

## Independent variables

### Price benchmarks

<table><tr><td>52-Week high</td><td>The ratio of the bidding price and the highest market price during the 12 months preceding the bid</td></tr></table>

(Continues)
Dependent variables

<table><tr><td>Privatisation premium benchmark</td><td>The moving average of privatisation premiums grouped by the target company's industry:<br/>- The privatisation premium is the log percentage difference between the privatisation price and the market price of the privatised company 42 days prior to the privatisation date<br/>- Privatisation deals must involve companies from the same industry as the target and must have occurred within the 52-week period ending 14 days prior to the bid date</td></tr><tr><td>52-Week high ratio</td><td>The ratio of the final offer price to the highest market price during a 12-month period preceding the bid</td></tr></table>

Control variables

<table><tr><td>Bid jump</td><td>The percentage change from the initial offer price to the final offer price</td></tr><tr><td>Bidder type</td><td>Indicator variables that take the value of 1 if the bidder is one of the four following types: (1) individual; (2) firm; (3) institutional investor and (4) group of bidders</td></tr><tr><td>Concert</td><td>An indicator variable that takes the value of 1 if the bidder acts in concert with other target's shareholders within the takeover bid and 0 otherwise</td></tr><tr><td>Direct toehold</td><td>The stake in the target's equity owned by the acquirer at the bid date</td></tr><tr><td>Financial dilution</td><td>1-(100-d<sub>1</sub>) (100-d<sub>2</sub>)...(100-d<sub>k</sub>)/100<sup>k</sup> where k is the number of equity changes before the bid date and d<sub>k</sub> is the financial dilution per equity change event k d<sub>k</sub> = [(free float ex-post<sub>k</sub> - free float ex-ante<sub>k</sub>)/free float ex-ante<sub>k</sub>]*100</td></tr><tr><td>Foreign company</td><td>An indicator variable that takes the value of 1 if the bidder is a foreign firm and 0 otherwise</td></tr><tr><td>No trading</td><td>An indicator variable that takes the value of 1 if the stocks of target have never been traded before the bid and 0 otherwise</td></tr><tr><td>Period revision</td><td>An indicator variable that takes the value of 1 if the bid period was extended at least once without changing the bidding price and 0 otherwise</td></tr><tr><td>Rival</td><td>An indicator variable that takes the value of 1 if a rival offer is made before the closing date and 0 otherwise</td></tr><tr><td>RPA foothold</td><td>An indicator variable that takes the value of 1 if the bidder bought a stake from the Romanian Privatisation Authority before the bid date and 0 otherwise</td></tr><tr><td>Squeeze-out toehold</td><td>An indicator variable that takes the value of 1 if the bidder's direct toehold is higher than 90% before June 29%, 2004%, and 95% afterwards and 0 otherwise</td></tr><tr><td>Target size</td><td>The natural logarithm of the target's market capitalisation 42 days prior to the bid date</td></tr><tr><td>Time effects</td><td>Indicator variables that take the value of 1 if the bid date falls in a given regulatory regime and 0 otherwise</td></tr><tr><td>Under control toehold</td><td>An indicator variable that takes the value of 1 if the bidder's direct toehold is lower than the legal control threshold triggering an MBR, that is 50% before June 29%, 2004%, and 33% afterwards</td></tr><tr><td>Zero toehold</td><td>An indicator variable that takes the value of 1 if the bidder owns no target share at the bid date and 0 otherwise</td></tr></table>