Managerial Performance, Bid Premiums, and the Characteristics of Takeover Targets
This paper tests the inefficient performance hypothesis and the pre-bid runup premium hypothesis of hostile takeovers. The long-term and short-term performance and the characteristics of friendly and hostile takeovers are compared. We find no indications of poor target performance over the five years prior to the takeover announcement. However, there is evidence that hostile takeovers do perform a correction for target managerial failure. This paper also finds that the type of offer is strongly related to the general trend of the M&A market and the size, and industry of the target firm. Higher takeover premiums and cash offers are more often associated with hostile offers. Moreover, the odds for hostile offers to incur competition among bidders and to be unsuccessful are significantly higher than that for friendly offers.
References listed on IDEAS
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- G. William Schwert, 2000.
"Hostility in Takeovers: In the Eyes of the Beholder?,"
Journal of Finance,
American Finance Association, vol. 55(6), pages 2599-2640, December.
- G. William Schwert, 1999. "Hostility in Takeovers: In the Eyes of the Beholder?," NBER Working Papers 7085, National Bureau of Economic Research, Inc.
- G. William Schwert, 1994.
"Mark-Up Pricing in Mergers and Acquisitions,"
NBER Working Papers
4863, National Bureau of Economic Research, Inc.
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