A theory on merger timing and announcement returns

Paulo J. Pereira and Artur Rodrigues ()
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Paulo J. Pereira: CEF.UP and Faculdade de Economia
Artur Rodrigues: Universidade do Minho - NIPE, http://www.eeg.uminho.pt

No 13/2015, NIPE Working Papers from NIPE - Universidade do Minho

Abstract: This paper develops a dynamic model for the timing and terms of mergers and acquisitions. In contrast to other models, we show that firms agree about the timing independently from how the merger surplus is shared. Firms agree on the timing and discuss the sharing rule of the merger surplus according to their bargaining power or some other exogenous factor. We also show that, under asymmetric information, the combination of surprises regarding merger timing and merger terms, can produce either negative or positive abnormal returns for the merging firms.

Keywords: Mergers; Merger terms; Timing; Uncertainty; Real Options; Event studies. (search for similar items in EconPapers)
JEL-codes: D81 G34 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-com and nep-ind
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