The dynamics of mergers and acquisitions

This paper presents a dynamic model of takeovers based on the stock market valuations of merging firms. The model incorporates competition and imperfect information and determines the terms and timing of takeovers by solving option exercise games between bidding and target shareholders. The implications of the model for returns to stockholders are consistent with the available evidence. In addition, the model generates new predictions relating these returns to the drift, volatility and correlation coefficient of the bidder and the target stock returns and to the dispersion of beliefs regarding the benefits of the takeover.


Published in:
Journal of Financial Economics -Amsterdam-, 77, 3, 649-672
Year:
2005
Publisher:
Elsevier
ISSN:
0304-405X
Keywords:
Note:
Explains firms' bidding strategies and the observed patterns in abnormal announcement returns.  
Laboratories:




 Record created 2010-04-24, last modified 2018-03-17

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