Takeover Bidding with Toeholds: The Case of the Owner's Curse
This article demonstrates that a potential acquirer with a toehold bids aggressively and possibly overpays in equilibrium. The aggressiveness of a bidder with a toehold increases further if he is able to renege on his winning bid. A bidder without a toehold, however, responds by shading his bids. The target firm can increase competition and the expected sale price if it only entertains nonretractable bids. This article provides testable implications on the probability of bidder success, stock price reactions on bid revisions and on resolution of the contest, and expected gains to bidders and the target firm. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Volume (Year): 11 (1998)
Issue (Month): 4 ()
|Contact details of provider:|| Postal: Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.|
Web page: http://www.rfs.oupjournals.org/
More information through EDIRC
|Order Information:||Web: http://www4.oup.co.uk/revfin/subinfo/|
References listed on IDEAS
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.:
- Shleifer, Andrei & Vishny, Robert W., 1986.
"Large Shareholders and Corporate Control,"
3606237, Harvard University Department of Economics.
- Riley, John G & Samuelson, William F, 1981.
American Economic Review,
American Economic Association, vol. 71(3), pages 381-92, June.
- Back, Kerry & Zender, Jaime F, 1993. "Auctions of Divisible Goods: On the Rationale for the Treasury Experiment," Review of Financial Studies, Society for Financial Studies, vol. 6(4), pages 733-64.
- Hirshleifer, David, 1989. "Facilitation of Competing Bids and the Price of a Takeover Target," University of California at Los Angeles, Anderson Graduate School of Management qt2496649g, Anderson Graduate School of Management, UCLA.
- Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-29, May.
- Jensen, Michael C. & Ruback, Richard S., 1983. "The market for corporate control : The scientific evidence," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 5-50, April.
- Stulz, ReneM., 1988. "Managerial control of voting rights : Financing policies and the market for corporate control," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 25-54, January.
- Harris, Milton & Raviv, Artur, 1988. "Corporate control contests and capital structure," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 55-86, January.
- Chowdhry, Bhagwan & Nanda, Vikram, 1993. " The Strategic Role of Debt in Takeover Contests," Journal of Finance, American Finance Association, vol. 48(2), pages 731-45, June.
- J. Riley & E. Maskin, 1981.
"Optimal Auctions with Risk Averse Buyers,"
311, Massachusetts Institute of Technology (MIT), Department of Economics.
- Mark Bagnoli, Barton L. Lipman, 1988. "Successful Takeovers without Exclusion," Review of Financial Studies, Society for Financial Studies, vol. 1(1), pages 89-110.
- Berkovitch, Elazar & Narayanan, M. P., 1993. "Motives for Takeovers: An Empirical Investigation," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 28(03), pages 347-362, September.
- Hirshleifer, David & Titman, Sheridan, 1990. "Share Tendering Strategies and the Success of Hostile Takeover Bids," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 295-324, April.
- Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
- Milgrom, Paul R & Weber, Robert J, 1982.
"A Theory of Auctions and Competitive Bidding,"
Econometric Society, vol. 50(5), pages 1089-1122, September.
When requesting a correction, please mention this item's handle: RePEc:oup:rfinst:v:11:y:1998:i:4:p:679-704. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.