The relationship between ownership structure and hostile takeovers in Sweden with an interntational perspective

Abstract: Background: Throughout the last century mergers and acquisitions have been categorized by changes in the global economy. Globalization and changes in legislations has brought forward so called waves that are rooted in the market for the United States. Where the act of acquisitions can be divided into both friendly and hostile takeovers, history shows that hostile takeovers are frequent in the US but less evident in the Swedish market. As for Sweden the existence of control enhancing mechanisms are utilized to enable control of a firm without owning a proportionate share of equity. While the trend of takeover activity is replicated elsewhere, the hostile aspect finds another route. The market for corporate control governs the hostile aspect where firms should be replaced with new managers if agency problems arise between the management and the shareholders. Thus looking at Sweden, corporate governance issues and the establishment of national laws are of certain importance. Purpose: The purpose of this thesis is to examine how the ownership structure in Swedish listed companies impacts on the occurrence of hostile takeovers and what implications a potential change in the corporate governance structure would have on it. Moreover we intend to map Sweden internationally to give a broad picture of the research area. Methodology: We have made use of a quantitative method for the empirical section and thereafter derived conclusions through the hypothetico-deductive approach. For testing the outcome of hostile bids in Sweden, chi-square tests for independence have been conducted and in regards of an international comparison we have implemented a correlation analysis. Conclusions: With the result at hand we concluded that the theory was partially aligned with the empirical data. The market for corporate control is not fully efficient in Sweden. The reason for that is the multiple voting rights implemented in the target firms which impede the successfulness in replacing a management. The hostile bid frequency has increased over the years, mainly due to potential agency problems among target firms. But parallel to this, which in some regards contradicts theory, is that firms neglects the prevalent ownership structure in Sweden and acquires a foothold as to make their hostile acquisition. In regards of the empirical data, concentrated ownership solely does not harm the market for corporate control in Sweden. Internationally, the correlation between ownership concentration and hostile bid frequencies proved to be negative where Sweden despite this attracts hostile acquirers.