Journal of Financial Economics Vol. 128 No. 2 2018
Bid anticipation, information revelation, and merger gains
Abstract
Because firms’ takeover motives are unobservable to investors, mergers are only partially anticipated and often appear as mixed blessings for acquirers. I construct and estimate a model to study the causes and consequences of bid anticipation and information revelation in mergers. Controlling for the market’s reassessment of the acquirer’s stand-alone value, I estimate that acquirers gain 4% from a typical merger. The total value of an active merger market averages 13% for acquirers, part of which is capitalized in their pre-merger market values. My model also explains the correlation between announcement returns and firm characteristics, as well as the low predictability of mergers.
- DOI
- 10.1016/j.jfineco.2018.02.010
- Volume
- 128
- Issue
- 2
- Pages
- 320-343
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref