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Negotiating M&As under uncertainty: The influence of managerial flexibility on the first-mover advantage

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  • Lukas, Elmar
  • Welling, Andreas
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    Abstract

    Using a dynamic real options approach we show that managerial flexibility is strengthening the first-mover advantage in bargaining M&As by undermining the bargaining power of the second mover.

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    File URL: http://www.sciencedirect.com/science/article/pii/S1544612311000432
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    Bibliographic Info

    Article provided by Elsevier in its journal Finance Research Letters.

    Volume (Year): 9 (2012)
    Issue (Month): 1 ()
    Pages: 29-35

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    Handle: RePEc:eee:finlet:v:9:y:2012:i:1:p:29-35

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    Web page: http://www.elsevier.com/locate/frl

    Related research

    Keywords: Real option; Game theory; Merger & Acquisition; Negotiation; Flexibility; Ultimatum game;

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    References

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    1. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 252, David K. Levine.
    2. Admati, Anat R & Perry, Motty, 1987. "Strategic Delay in Bargaining," Review of Economic Studies, Wiley Blackwell, vol. 54(3), pages 345-64, July.
    3. Lambrecht, Bart M., 2004. "The timing and terms of mergers motivated by economies of scale," Journal of Financial Economics, Elsevier, vol. 72(1), pages 41-62, April.
    4. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
    5. Luis Alvarez & Rune Stenbacka, 2006. "Takeover Timing, Implementation Uncertainty, and Embedded Divestment Options," Review of Finance, European Finance Association, vol. 10(3), pages 417-441, September.
    6. Bart M. Lambrecht & Stewart C. Myers, 2007. "A Theory of Takeovers and Disinvestment," Journal of Finance, American Finance Association, vol. 62(2), pages 809-845, 04.
    7. John C. Harsanyi & Reinhard Selten, 1972. "A Generalized Nash Solution for Two-Person Bargaining Games with Incomplete Information," Management Science, INFORMS, vol. 18(5-Part-2), pages 80-106, January.
    8. Dirk Hackbarth & Erwan Morellec, 2006. "Stock Returns in Mergers and Acquisitions," Swiss Finance Institute Research Paper Series 06-01, Swiss Finance Institute.
    9. Morellec, Erwan & Zhdanov, Alexei, 2005. "The dynamics of mergers and acquisitions," Journal of Financial Economics, Elsevier, vol. 77(3), pages 649-672, September.
    10. Guth, Werner & Schmittberger, Rolf & Schwarze, Bernd, 1982. "An experimental analysis of ultimatum bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 367-388, December.
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    Citations

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    Cited by:
    1. Lukas, Elmar & Welling, Andreas, 2014. "Timing and eco(nomic) efficiency of climate-friendly investments in supply chains," European Journal of Operational Research, Elsevier, vol. 233(2), pages 448-457.
    2. Elmar Lukas & Andreas Welling, 2012. "On the Investment-Uncertainty Relationship: A Game Theoretic Real Option Approach," FEMM Working Papers 120030, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
    3. Lukas, Elmar & Welling, Andreas, 2014. "On the investment–uncertainty relationship: A game theoretic real option approach," Finance Research Letters, Elsevier, vol. 11(1), pages 25-35.

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