Information and Efficiency in Tender Offers

Robert Marquez and Bilge Yılmaz

Econometrica, 2008, vol. 76, issue 5, pages 1075-1101

Abstract: We analyze tender offers where privately informed shareholders are uncertain about the raider's ability to improve firm value. The raider suffers a "lemons problem" in that, for any price offered, only shareholders who are relatively pessimistic about the value of the firm tender their shares. Consequently, the raider finds it too costly to induce shareholders to tender when their information is positive. In the limit as the number of shareholders gets arbitrarily large, when private benefits are relatively low, the tender offer is unsuccessful if the takeover has the potential to create value. The takeover market is therefore inefficient. In contrast, when private benefits of control are high, the tender offer allocates the firm to any value-increasing raider, but may also allow inefficient takeovers to occur. Unlike the case where all information is symmetric, shareholders cannot always extract the entire surplus from the acquisition. Copyright 2008 The Econometric Society.

Date: 2008

Downloads: (external link)
http://hdl.handle.net/10.3982/ECTA6178 link to full text (text/html)
Access to full text is restricted to subscribers.

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: http://EconPapers.repec.org/RePEc:ecm:emetrp:v:76:y:2008:i:5:p:1075-1101

Ordering information: This journal article can be ordered from
http://www.blackwell ... mb.asp?ref=0012-9682

Access Statistics for this article

Econometrica is edited by Stephen Morris

More articles in Econometrica from Econometric Society
Contact information at EDIRC.
Series data maintained by Christopher F. Baum ().