A theory on merger timing and announcement returns
This paper develops a dynamic model for the timing and terms of mergers and acquisitions. In contrast to other models, we show that firms agree about the timing independently from how the merger surplus is shared. Firms agree on the timing and discuss the sharing rule of the merger surplus according to their bargaining power or some other exogenous factor. We also show that, under asymmetric information, the combination of surprises regarding merger timing and merger terms, can produce either negative or positive abnormal returns for the merging firms.
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- Sara B. Moeller & Frederik P. Schlingemann & Rene M. Stulz, 2004. "Wealth Destruction on a Massive Scale? A Study of Acquiring-Firm Returns in the Recent Merger Wave," NBER Working Papers 10200, National Bureau of Economic Research, Inc.
- Ahern, Kenneth R., 2012. "Bargaining power and industry dependence in mergers," Journal of Financial Economics, Elsevier, vol. 103(3), pages 530-550.
- Thijssen, Jacco J.J., 2008. "Optimal and strategic timing of mergers and acquisitions motivated by synergies and risk diversification," Journal of Economic Dynamics and Control, Elsevier, vol. 32(5), pages 1701-1720, May.
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- Gregor Andrade & Mark Mitchell & Erik Stafford, 2001. "New Evidence and Perspectives on Mergers," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 103-120, Spring.
- Moeller, Sara B. & Schlingemann, Frederik P. & Stulz, Rene M., 2004. "Firm size and the gains from acquisitions," Journal of Financial Economics, Elsevier, vol. 73(2), pages 201-228, August.
- Kathryn Barraclough & David T. Robinson & Tom Smith & Robert E. Whaley, 2013. "Using Option Prices to Infer Overpayments and Synergies in M&A Transactions," Review of Financial Studies, Society for Financial Studies, vol. 26(3), pages 695-722.
- Lambrecht, Bart M., 2004. "The timing and terms of mergers motivated by economies of scale," Journal of Financial Economics, Elsevier, vol. 72(1), pages 41-62, April. Full references (including those not matched with items on IDEAS)
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