The appraisal remedy and merger premiums

Abstract

The appraisal remedy affords corporate shareholders the option to redeem their shares for cash in the event of certain transactions, including mergers. Access to appraisal for publicly traded shares, however, differs from state to state. We present the first large-sample empirical study of the effect of appraisal rights on target shareholder gains from acquisitions. We examine 1,350 mergers involving publicly held firms. We find some evidence that appraisal reduces average shareholder gains in transactions involving self-interested managers. For the entire sample, however, we find no evidence that appraisal has any effect, positive or negative, on target shareholder gains from takeovers.