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Stock Price Manipulation Through Takeover Bids

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Author Info

  • BAGNOLI, M.
  • LIPMAN, B.

Abstract

The announcement of a takeover bid causes significant increases in the target's stock price, but the possibility that a bid is motivated to cause this increase so that the bidder can sell his holdings has not been studied. We show that stock price manipulation lowers the prebid stock price. Furthermore, if there is little takeover activity, manipulation increases takeover bids and prevents some efficient takeovers. In this case, stockholders prefer to ban it. However, if there is a high level of takeover activity, serious bidders are better off and social surplus is increased by the possibility of manipulation. In this case, stockholders may oppose a ban.

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Bibliographic Info

Paper provided by Michigan - Center for Research on Economic & Social Theory in its series Papers with number 90-09.

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Length: 10 pages
Date of creation: 1989
Date of revision:
Handle: RePEc:fth:michet:90-09

Contact details of provider:
Postal: UNIVERSITY OF MICHIGAN, DEPARTMENT OF ECONOMICS CENTER FOR RESEARCH ON ECONOMIC AND SOCIAL THEORY, ANN ARBOR MICHIGAN U.S.A.

Related research

Keywords: mergers ; enterprises ; pricing ; financial market;

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