If at First You Don’t Succeed: The Effect of the Option to Resolicit on Corporate Takeovers

Ann B. Gillette; Thomas H. Noe

doi:10.1093/rfs/hhj011

← Search

If at First You Don’t Succeed: The Effect of the Option to Resolicit on Corporate Takeovers

Ann B. Gillette^1,2; Thomas H. Noe³

¹ Federal Reserve Bank of Atlanta · ² Kennesaw State University · ³ Tulane University

Review of Financial Studies 2006

This article models, and experimentally simulates, the free-rider problem in a takeover when the raider has the option to “resolicit,” that is, to make a new offer after an offer has been rejected. In theory, the option to resolicit, by lowering offer credibility, increases the dissipative losses associated with free riding. The outcomes of our experiment support this prediction and produce losses from free riding even higher than theoretically predicted. These dissipation losses reduce raider gains to less than 3% of synergy value of the acquisition

DOI: 10.1093/rfs/hhj011
Volume: 19 (2)
Pages: 561-603
Language: en
Export: BibTeX
Sources: openalex crossref