The Deterring Role of the Medium of Payment in Takeover Contests: Theory and Evidence from the UK
AbstractThe deterring role of the medium of payment in a takeover contest is analyzed from the point of view of the bidder. Cash, debt and equity are considered as alternative mediums of payment, and the bidder equilibrium strategies are specified following the Perfect Bayesian Equilibrium requirements for a signaling game. The model predicts notably that cash offers signal a high-valuing bidder, strongly determined to acquire the target firm.
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Bibliographic InfoPaper provided by Ecole des Hautes Etudes Commerciales, Universite de Geneve- in its series Papers with number 98.16.
Length: 26 pages
Date of creation: 1998
Date of revision:
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Postal: Suisse; Ecole des Hautes Etudes Commerciales, Universite de Geneve, faculte des SES. 102 Bb. Carl-Vogt CH - 1211 Geneve 4, Suisse
Phone: (+ 41 22) 705-8263
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Web page: http://www.unige.ch/gsem/
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TAKEOVERS ; COMPETITION;
Other versions of this item:
- Philippe Cornu & Dusan Isakov*, 2000. "The Deterring Role of the Medium of Payment in Takeover Contests: Theory and Evidence from the UK," European Financial Management, European Financial Management Association, vol. 6(4), pages 423-440.
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
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- Fabel, Oliver & Kolmar, Martin, 2002. "Management takeover battles and the role of the golden handshake," Discussion Papers, Series 1 319, University of Konstanz, Department of Economics.
- de La Bruslerie, Hubert, 2013. "Crossing takeover premiums and mix of payment: An empirical test of contractual setting in M&A transactions," Journal of Banking & Finance, Elsevier, vol. 37(6), pages 2106-2123.
- Ismail, Ahmad & Krause, Andreas, 2010. "Determinants of the method of payment in mergers and acquisitions," The Quarterly Review of Economics and Finance, Elsevier, vol. 50(4), pages 471-484, November.
- de La Bruslerie, Hubert, 2012. "Corporate acquisition process: Is there an optimal cash-equity payment mix?," International Review of Law and Economics, Elsevier, vol. 32(1), pages 83-94.
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