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The time-varying prediction of successful mergers

Author

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  • Giovanni BARONE-ADESI

    (University of Lugano and Swiss Finance Institute)

  • Giuseppe CORVASCE

    (University of Lugano and Swiss Finance Institute)

Abstract

The dynamics of the physical probability of firms that undertake a stock swap merger is developed through a simple model. Using a sample of 1090 deals from 1992 to 2008, we show how movements in target stock prices are informative of the success or failure of a stock swap merger and how movements in bidder stock prices are informative at the beginning of the deal period . Without any assumption on the convergence of the target stock price to the bid offer, our results share the findings of Samuelson and Rosenthal (1986). According to our results bidder and target price movements represent the "thermometer" of a deal status.

Suggested Citation

  • Giovanni BARONE-ADESI & Giuseppe CORVASCE, 2009. "The time-varying prediction of successful mergers," Swiss Finance Institute Research Paper Series 09-22, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp0922
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    More about this item

    Keywords

    Merger arbitrage; probit model;

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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