Preemptive Bidding, Target Resistance, and Takeover Premiums

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Type
Article: article from journal or magazin.
Collection
Publications
Institution
Title
Preemptive Bidding, Target Resistance, and Takeover Premiums
Journal
Journal of Financial Economics
Author(s)
Dimopoulos  T., Sacchetto  S.
ISSN
0304-405X
Publication state
Published
Issued date
12/2014
Peer-reviewed
Oui
Volume
114
Number
3
Pages
444-470
Language
english
Abstract
We evaluate empirically two sources of large takeover premiums: preemptive bidding and target resistance. We develop an auction model that features costly sequential entry of bidders in takeover contests and encompasses both explanations. We estimate the model parameters by simulated method of moments for a sample of US takeovers. Our estimates imply that target resistance explains the entire magnitude of the premium in 74% of successful single-bidder contests. Simulation experiments show that initial bidders have, on average, a higher valuation for the target than rival bidders, so that a relatively low initial bid is sufficient to deter a rival from entry.
Keywords
Mergers and acquisitions, auctions target resistance, preemptive bidding, structural estimation
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Create date
13/01/2012 16:26
Last modification date
21/08/2019 6:12
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