Entry and competition in takeover auctions

Matthew Gentry and Caleb Stroup

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We estimate the degree of uncertainty faced by potential bidders in takeover auctions and quantify how it affects prices in auctions and negotiations. The high degree of uncertainty revealed by our structural estimation encourages entry in auctions but reduces a target’s bargaining power in negotiations. In the aggregate, auctions and negotiations produce similar prices, even though auctions are preferred in takeover markets with high uncertainty, while the reverse is true for negotiations. Firm characteristics predict pre-entry uncertainty and thus are informative about the relative performance of auctions and negotiations for individual targets.

JEL-codes: G0 (search for similar items in EconPapers)
Date: 2018-11-13
New Economics Papers: this item is included in nep-com, nep-des and nep-gth
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Citations: View citations in EconPapers (4)

Published in Journal of Financial Economics, 13, November, 2018. ISSN: 0304-405X

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http://eprints.lse.ac.uk/90604/ Open access version. (application/pdf)

Related works:
Journal Article: Entry and competition in takeover auctions (2019)
Working Paper: Entry and Competition in Takeover Auctions (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:90604

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