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Bidder Discounts and Target Premia in Takeovers

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Author Info
Boyan Jovanovic
Serguey Braguinsky

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Abstract

When a takeover is announced, the sum of the stock-market values of the firms involved often falls, and the value of the acquirer almost always does. Does this mean that takeovers do not raise the values of the firms involved? Not necessarily. We set up a model in which the equilibrium number of takeovers is constrained efficient. Yet, upon news of a takeover, a target's price rises, the bidder's price falls, and, most of the time the joint value of the target and acquirer also falls.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9009.

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Date of creation: Jun 2002
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Handle: RePEc:nbr:nberwo:9009

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G3 - Financial Economics - - Corporate Finance and Governance

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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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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.)

  1. Sanjai Bhagat & Ming Dong & David A. Hirshleifer & Robert B. Noah, 2004. "Do Tender Offers Create Value? New Methods and Evidence," Finance 0412011, EconWPA. [Downloadable!]
    Other versions:
  2. Matthew Rhodes-Kropf & David T. Robinson, 2004. "The Market for Mergers and the Boundaries of the Firm," Working Papers 05-18, Utrecht School of Economics. [Downloadable!]
    Other versions:
  3. Song, Moon H. & Walkling, Ralph A., 2004. "Anticipation, Acquisitions and the Bidder Return Puzzle," Working Paper Series 2004-15, Ohio State University, Charles A. Dice Center for Research in Financial Economics. [Downloadable!]
  4. Sara B. Moeller & Frederik P. Schlingemann & Rene M. Stulz, 2004. "Wealth Destruction on a Massive Scale? A Study of Acquiring-Firm Returns in the Recent Merger Wave," NBER Working Papers 10200, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Bhagat, Sanjai & Dong, Ming & Hirsheifer, David & Noah, Noah, 2004. "Do Tender Offers Create Value? New Methods and Evidence," Working Paper Series 2004-4, Ohio State University, Charles A. Dice Center for Research in Financial Economics. [Downloadable!]
  6. Sara B. Moeller & Frederik P. Schlingemann & Rene M. Stulz, 2004. "Do Acquirers With More Uncertain Growth Prospects Gain Less From Acquisitions?," NBER Working Papers 10773, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Song, Moon H. & Walkling, Ralph A., 2005. "Anticipation, Acquisitions and Bidder Returns," Working Paper Series 2005-11, Ohio State University, Charles A. Dice Center for Research in Financial Economics. [Downloadable!]
  8. Molnar, Jozsef, 2007. "Pre-emptive horizontal mergers: theory and evidence," Research Discussion Papers 17/2007, Bank of Finland. [Downloadable!]
    Other versions:
  9. Margsiri, Worawat & Melloy, Antonio S. & Ruckesz, Martin E., 2008. "A Dynamic Analysis of Growth via Acquisition," CEI Working Paper Series 2008-8, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
  10. Isachenkova, N. & Weeks, M., 2008. "Acquisition, Insolvency and Managers in UK Small Companies," Cambridge Working Papers in Economics 0838, Faculty of Economics, University of Cambridge. [Downloadable!]
  11. Sara B. Moeller & Frederik P. Schlingemann & Rene M. Schultz, 2004. "Do Acquirers With More Uncertain Growth Prospects Gain Less From Acquisitions?," Working Papers 05-17, Utrecht School of Economics. [Downloadable!]
  12. Sara B. Moeller & Frederik P. Schlingemann & Rene M. Stulz, 2003. "Do shareholders of acquiring firms gain from acquisitions?," NBER Working Papers 9523, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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    Other versions:
  15. Moeller, Sara B. & Schilngemann, Frederik P. & Stulz, Rene M., 2004. "Do Acquirers with More Uncertain Growth Prospects Gain Less from Acquisitions?," Working Paper Series 2004-19, Ohio State University, Charles A. Dice Center for Research in Financial Economics. [Downloadable!]
  16. Frantzeskakis, Kyriakos & Ueda, Masako, 2007. "A Dynamic Equilibrium Model of Firm's Life Cycle and Mergers as Efficient Reallocation," CEPR Discussion Papers 6079, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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