Irrevocable commitments and tender offer outcomes

Tomi Fyrqvist, Elias Rantapuska and Sami Torstila

Journal of Business Finance & Accounting, 2021, vol. 48, issue 7-8, 1290-1331

Abstract: Irrevocable commitments (ICs) are undertakings by target‐firm blockholders to accept an upcoming takeover bid before its announcement. Using a novel manually collected dataset, we develop three new hypotheses and explore one existing hypothesis to explain the use of ICs: (1) trade‐off between speed and price, (2) trade‐off between completion probability and price, (3) differences in bargaining power, and (4) blockholder certification. Transactions with more than 20% of shares irrevocably committed have a 7%–16% higher probability of tender offer completion and 8–10 days shorter bid duration. A transaction with an average‐sized IC is associated with a 2.9 percentage points lower four‐week bid premium than a transaction with no IC. Overall, the results appear most consistent with the hypothesis on completion probability versus price. The results also offer partial evidence in favor of the certification hypothesis.

Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/jbfa.12515

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jbfnac:v:48:y:2021:i:7-8:p:1290-1331

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0306-686X

Access Statistics for this article

Journal of Business Finance & Accounting is currently edited by P. F. Pope, A. W. Stark and M. Walker

More articles in Journal of Business Finance & Accounting from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().