We analyze tender offers where privately informed shareholders are uncertain about the raider's ability to improve firm value. The raider suffers a "lemons problem" in that, for any price offered, only shareholders who are relatively pessimistic about the value of the firm tender their shares. Consequently, the raider finds it too costly to induce shareholders to tender when their information is positive. In the limit as the number of shareholders gets arbitrarily large, when private benefits are relatively low, the tender offer is unsuccessful if the takeover has the potential to create value. The takeover market is therefore inefficient. In contrast, when private benefits of control are high, the tender offer allocates the firm to any value-increasing raider, but may also allow inefficient takeovers to occur. Unlike the case where all information is symmetric, shareholders cannot always extract the entire surplus from the acquisition. Copyright 2008 The Econometric Society.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Publisher Info
Article provided by Econometric Society in its journal Econometrica.
Volume (Year): 76 (2008) Issue (Month): 5 (09) Pages: 1075-1101 Download reference. The following formats are available: HTML
(with abstract),
plain text
(with abstract),
BibTeX,
RIS (EndNote, RefMan, ProCite),
ReDIF