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Takeovers and Divergence of Investor Opinion


  • Sris Chatterjee
  • Kose John
  • An Yan


We test several hypotheses on how takeover premium is related to investors' divergence of opinion on a target's equity value. We show that the total takeover premium, the pre-announcement target stock price run-up, and the post-announcement stock price markup are all higher when investors have higher divergence of opinion. We obtain identical results with higher market-level investor sentiment. When divergence of opinion is higher, a firm is less likely to be a takeover target, although takeover synergy in successful takeovers is higher. Our results suggest that takeovers may play a role in explaining high contemporaneous stock prices in the presence of high divergence of investor opinion. The Author 2011. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail:, Oxford University Press.

Suggested Citation

  • Sris Chatterjee & Kose John & An Yan, 2012. "Takeovers and Divergence of Investor Opinion," Review of Financial Studies, Society for Financial Studies, vol. 25(1), pages 227-277.
  • Handle: RePEc:oup:rfinst:v:25:y:2012:i:1:p:227-277

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    Cited by:

    1. Pierpaolo Battigalli & Carlo Chiarella & Stefano Gatti & Tommaso Orlando, 2017. "M&A negotiations with limited information: how do opaque firms buy and get bought?," Working Papers 596, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    2. Kazunori Miwa & Satoshi Taguchi & Tatsushi Yamamoto, 2017. "Are IPOs “Overpriced?” Strategic Interactions between the Entrepreneur and the Underwriter," Discussion Paper Series DP2017-07, Research Institute for Economics & Business Administration, Kobe University.
    3. repec:eee:corfin:v:46:y:2017:i:c:p:1-24 is not listed on IDEAS
    4. Zhu, PengCheng & Jog, Vijay & Otchere, Isaac, 2014. "Idiosyncratic volatility and mergers and acquisitions in emerging markets," Emerging Markets Review, Elsevier, vol. 19(C), pages 18-48.
    5. Carlin, Bruce I. & Longstaff, Francis A. & Matoba, Kyle, 2014. "Disagreement and asset prices," Journal of Financial Economics, Elsevier, vol. 114(2), pages 226-238.
    6. Vijh, Anand M. & Yang, Ke, 2013. "Are small firms less vulnerable to overpriced stock offers?," Journal of Financial Economics, Elsevier, vol. 110(1), pages 61-86.
    7. repec:eee:corfin:v:45:y:2017:i:c:p:496-521 is not listed on IDEAS
    8. Iryna Banakh & Taras Banakh & Pavel Trisch & Myroslava Vovk, 2012. "Toehold Purchase Problem: A comparative analysis of two strategies," Papers 1204.2065,, revised Sep 2014.
    9. Bruce I. Carlin & Francis A. Longstaff & Kyle Matoba, 2012. "Disagreement and Asset Prices," NBER Working Papers 18619, National Bureau of Economic Research, Inc.
    10. Takahiro Endo & Nidhi Srinivas & Yuki Tsuboyama, 2017. "The Role of Meta-organising in Legitimacy Recovery: The Case of Frozen Food Category in Japan," Discussion Paper Series DP2017-10, Research Institute for Economics & Business Administration, Kobe University.
    11. Kim, Jun Sik & Ryu, Doojin & Seo, Sung Won, 2014. "Investor sentiment and return predictability of disagreement," Journal of Banking & Finance, Elsevier, vol. 42(C), pages 166-178.
    12. Koch, Adam S. & Lefanowicz, Craig E. & Robinson, John R., 2012. "The effect of quarterly earnings guidance on share values in corporate acquisitions," Journal of Corporate Finance, Elsevier, vol. 18(5), pages 1269-1285.

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