Entry and Competition in Takeover Auctions

Caleb Stroup and Matthew Gentry ()
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Matthew Gentry: Department of Economics, London School of Economics and Political Science

No 17-01, Working Papers from Davidson College, Department of Economics

Abstract: We estimate the degree of uncertainty faced by bidders in takeover auctions and quantify how it affects the ability of auctions and of negotiations to produce high prices for target shareholders. The high degree of uncertainty revealed by our structural estimation procedure degrades the quality of the entering bidder pool in auctions but increases its size, while at the same time reducing a target?s bargaining power in negotiations. In the aggregate, auctions and negotiations produce similar prices for target shareholders, even though auctions are preferred in takeover environments with high uncertainty, while the reverse is true for negotiations.

Keywords: Takeover Auctions; Mergers and Acquisitions (search for similar items in EconPapers)
JEL-codes: D44 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2017-01
New Economics Papers: this item is included in nep-com, nep-mic and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Entry and competition in takeover auctions (2019)
Working Paper: Entry and competition in takeover auctions (2018)
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