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Why mergers reduce profits, and raise share prices: A theory of preemptive mergers Author info | Abstract | Publisher info | Download info | Related research | Statistics Fridolfsson S.O.
Stennek J.
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We provide a possible explanation for the empirical puzzle that mergers often reduce profits, but raise share prices. If being an "insider" is better than being an "outsider", firms may merge to preempt their partner merging with a rival. The insiders'stock market value is increased, since the risk of becoming an outsider is eliminated. These results are derived in an endogenous-merger model, predicting the conditions under which mergers occur, when they occur, and how the surplus is shared.
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Paper provided by University of Antwerp, Faculty of Applied Economics in its series Working Papers with number
1999018.
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Length: 36 pages
Date of creation: Jun 1999Date of revision:
Handle: RePEc:ant:wpaper:1999018Contact details of provider: Postal: Prinsstraat 13, B-2000 Antwerpen Web page: http://www.ua.ac.be/tew More information through EDIRC
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references Cited by : (explanations , Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.)
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Roller, L.-H. & Stennek, J. & Verboven, F., 2000.
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Jo Seldeslachts & Joseph A. Clougherty & Pedro Pita Barros, 2007.
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SP II 2007-02, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
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University of California Santa Barbara - Department of Economics
10-00, California Santa Barbara - Department of Economics.
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Lommerud, K.E. & Straume, O.R. & Sorgard, L., 2000.
"Merger Profitability in Unionized Oligopoly ,"
Norway; Department of Economics, University of Bergen
1000, Department of Economics, University of Bergen.
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"Merger Profitability in Unionized Oligopoly ,"
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"Merger Profitability in Unionized Oligopoly ,"
University of California at Santa Barbara, Economics Working Paper Series
wp10-00, Department of Economics, UC Santa Barbara.
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CESifo Working Paper Series
CESifo Working Paper No. , CESifo GmbH.
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