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Target Financial Independence And Takeover Pricing


  • Jan Jindra
  • Thomas Moeller


type="main" xml:lang="en"> In a large sample of U.S. takeovers, we find that acquisitions of targets with greater financial independence are associated with higher takeover premiums and lower acquirer announcement returns. This empirical result is most consistent with targets' deriving bargaining power from their financial independence. Raising external funds is costly. Targets that do not depend on external funds do not need new external capital and have no reason to acquiesce potential takeover premium to acquirers that can provide capital. Therefore, more financially independent targets should be in stronger bargaining positions vis-à-vis potential acquirers, leading to the effect on takeover pricing that we observe.

Suggested Citation

  • Jan Jindra & Thomas Moeller, 2015. "Target Financial Independence And Takeover Pricing," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 38(3), pages 379-413, September.
  • Handle: RePEc:bla:jfnres:v:38:y:2015:i:3:p:379-413

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    Cited by:

    1. Mittal, Amit & Garg, Ajay Kumar, 2017. "Private information implications for acquirers and targets in horizontal mergers," MPRA Paper 85355, University Library of Munich, Germany.

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