Facilitation of Competing Bids and the Price of a Takeover Target
Facilitation of Competing Bids and the Price of a Takeover Target Abstract Initially uninformed bidders must incur costs to learn their (independent) valuations of a potential takeover target. The first bidder makes either a preemptive bid that will deter the second bidder from investigating, or a lower bid that will induce the second bidder to investigate and possibly compete. We show that the expected price of the target may be higher when the first bidder makes a deterring bid than when there is competitive bidding. Hence, by weakening the first bidderâ€™s incentive to choose a preemptive bid, regulatory and management policies to assist competing bidders may reduce both the expected takeover price and social welfare.
|Date of creation:||25 May 1989|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.escholarship.org/repec/anderson_fin/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:cdl:anderf:qt2496649g. 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: (Lisa Schiff)
If references are entirely missing, you can add them using this form.