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Merger Failure and Merger Profitability

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  • Hviid, Morten
  • Prendergast, Canice

Abstract

The focus of this paper is the effect of merger proposals on the expected profitability of the bidder and the target. The authors illustrate how an unsuccessful bid may increase the profitability of the target but reduce the profitability of the bidding firm, relative to the profitability of the firms before the merger offer. The profitability of a merger proposal is lowered due to learning from rejection. The authors use their theoretical model to explain empirical work on this issue. Copyright 1993 by Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Industrial Economics.

Volume (Year): 41 (1993)
Issue (Month): 4 (December)
Pages: 371-86

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Handle: RePEc:bla:jindec:v:41:y:1993:i:4:p:371-86

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-1821

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Cited by:
  1. Gärtner, Dennis L. & Schmutzler, Armin, 2009. "Merger negotiations and ex-post regret," Journal of Economic Theory, Elsevier, vol. 144(4), pages 1636-1664, July.
  2. Thomas Borek & Stefan Buehler & Armin Schmutzler, 2004. "Mergers under Asymmetric Information – Is there a Lemons Problem?," SOI - Working Papers 0408, Socioeconomic Institute - University of Zurich.
  3. Thomas Borek & Stefan Bühler & Armin Schmutzler, 2008. "Analyzing Mergers under Asymmetric Information: A Simple Reduced-Form Approach," University of St. Gallen Department of Economics working paper series 2008 2008-15, Department of Economics, University of St. Gallen.
  4. Thomas Borek & Stefan Buehler & Armin Schmutzler, 2002. "Weddings with Uncertain Prospects – Mergers under Asymmetric Information," SOI - Working Papers 0213, Socioeconomic Institute - University of Zurich, revised Feb 2004.
  5. Albert Banal-Estañol & Jo Seldeslachts, 2005. "Merger Failures," CIG Working Papers SP II 2005-09, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  6. Hankir, Yassin & Rauch, Christian & Umber, Marc P., 2011. "Bank M&A: A market power story?," Journal of Banking & Finance, Elsevier, vol. 35(9), pages 2341-2354, September.
  7. Frank Stähler, 2014. "Partial ownership and cross-border mergers," Journal of Economics, Springer, vol. 111(3), pages 209-237, April.

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