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Bid Resistance by Takeover Targets: Managerial Bargaining or Bad Faith?


  • Bates, Thomas W.
  • Becher, David A.


This paper examines management’s motives for rejecting takeover bids and the associated shareholder wealth effects. We develop measures of initial bid quality and find a significant negative correlation between the quality of a bid and rejection. The likelihood of higher follow-on offers decreases with bid quality and is greater when targets have classified boards and chief executive officers (CEOs) with significant personal wealth tied to the transaction. Target CEOs who fail to close high-quality offers experience a significant rate of forced turnover. Overall, the results support a price improvement motive for contested bids.

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  • Bates, Thomas W. & Becher, David A., 2017. "Bid Resistance by Takeover Targets: Managerial Bargaining or Bad Faith?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 52(3), pages 837-866, June.
  • Handle: RePEc:cup:jfinqa:v:52:y:2017:i:03:p:837-866_00

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    Cited by:

    1. Sridhar Gogineni & Pawan Jain, 0. "The Role of Target Termination Fees in REIT Mergers," The Journal of Real Estate Finance and Economics, Springer, vol. 0, pages 1-39.
    2. Gogineni, Sridhar & Upadhyay, Arun, 2020. "Target governance provisions and acquisition types," Journal of Business Research, Elsevier, vol. 110(C), pages 160-172.
    3. Levit, Doron, 2017. "Advising shareholders in takeovers," Journal of Financial Economics, Elsevier, vol. 126(3), pages 614-634.
    4. Carline, Nicholas F. & Linn, Scott C. & Yadav, Pradeep K., 2014. "Corporate governance and the nature of takeover resistance," CFR Working Papers 14-01, University of Cologne, Centre for Financial Research (CFR).

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