Open AccessPosted Content
Asymmetric Information and the Medium of Exchange in Takeovers: Theory and Tests
Reads0
Chats0
TLDR
In this paper, the authors identify a separating equilibrium in which the value of the bidder firm is revealed by the mix of cash and securities used as payment for the target in a model of takeovers under asymmetric information.Abstract:
In a model of takeovers under asymmetric information, we identify a separating equilibrium in which the value of the bidder firm is revealed by the mix of cash and securities used as payment for the target. The model predicts that the revealed bidder value is monotonically increasing and convex in the fraction of the total offer that consists of cash. We examine the model restrictions using data from Canada where mixed offers are both relatively frequent and free of the confounding tax-related options characterizing mixed offers in the U.S.. We find that the average announcement-month bidder abnormal return in mixed offers is large and significant. However, maximum likelihood estimates of parameters in both linear and non-linear cross-sectional regressions fail to support the model predictions.read more
Citations
More filters
What Do Returns to Acquiring Firms Tell Us? Evidence from Firms That Make
TL;DR: In this article, the same bidder chooses different types of targets and methods of payment, and any variation in returns must be due to the characteristics of the target and the bid, which is consistent with a liquidity discount, and tax and control effects in this market.
Posted Content
Glamour, Value and the Post-Acquisition Performance of Acquiring Firms
TL;DR: In this article, the authors used a methodology robust to these criticisms to show that bidders in mergers underperform while bidder in tender offers overperform in the three years after the acquisition.
Journal ArticleDOI
Trade-Off and Pecking Order Theories of Debt
TL;DR: Taxes, bankruptcy costs, transactions costs, adverse selection, and agency conflicts have all been advocated as major explanations for the corporate use of debt financing as mentioned in this paper, and these ideas have often been synthesized into the trade-off theory and the pecking order theory of leverage.
Journal ArticleDOI
The Choice of Payment Method in European Mergers and Acquisitions
Mara Faccio,Ronald W. Masulis +1 more
TL;DR: In this paper, the authors studied the impact of corporate governance concerns and debt financing constraints on the bidder's payment choice for publicly and privately held targets in the 1997-2000 period.
Journal ArticleDOI
The Method of Payment in Corporate Acquisitions, Investment Opportunities, and Management Ownership
TL;DR: In this article, the authors examined the motives underlying the payment method in corporate acquisitions and found that firms whose value depends more on growth options should finance themselves more with equity than with debt, while firms with risky debt outstanding may not exercise a real investment option if doing so transfers wealth from equityholders to debtholders.
References
More filters
Journal ArticleDOI
The market for corporate control: The scientific evidence☆
TL;DR: A review of the scientific literature on the market for corporate control can be found in this paper, where the authors argue that corporate control is best viewed as an arena in which managerial teams compete for the rights to manage corporate resources.
Journal ArticleDOI
Signaling Games and Stable Equilibria
In-Koo Cho,David M. Kreps +1 more
TL;DR: In this paper, the authors present a number of formal restrictions of this sort, investigate their behavior in specific examples, and relate these restrictions to Kohlberg and Mertens' notion of stability.
Book
Introduction to the Theory and Practice of Econometrics
TL;DR: In this article, the authors present an interweaving of inferential approaches and theory and practice in econometrics, and interweave inferential approach and theory in Econometric applications.
Journal ArticleDOI
Corporate Takeover Bids, Methods of Payment, and Bidding Firms' Stock Returns
TL;DR: In this paper, the authors explored the role of the method of payment in explaining common stock returns of bidding firms at the announcement of takeover bids and revealed significant differences in the abnormal returns between common stock exchanges and cash offers.