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Toeholds and information quality in common‐value takeover auctions

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  • Anna Dodonova

Abstract

In this article I analyze the effect of the sensitivity of firm value on the information available to potential acquirers in common‐value takeover auctions with toeholds. I show that the quality of information does not affect equilibrium when bidders have equal toeholds but has a significant effect when toeholds are different. My article demonstrates that increasing the relative information quality of the bidder with a smaller toehold makes both bidders bid more aggressively and leads to a higher price. I also analyze the combined effect of toeholds and information quality on equilibrium bidding strategies and discuss ways target shareholders can increase the expected final price.

Suggested Citation

  • Anna Dodonova, 2024. "Toeholds and information quality in common‐value takeover auctions," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 47(4), pages 1229-1244, December.
    • Handle: RePEc:bla:jfnres:v:47:y:2024:i:4:p:1229-1244
    DOI: 10.1111/jfir.12393
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