The time-varying prediction of successful mergers

Giovanni Barone-Adesi and Giuseppe Corvasce
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Giovanni Barone-Adesi: University of Lugano and Swiss Finance Institute
Giuseppe Corvasce: University of Lugano and Swiss Finance Institute

No 09-22, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: The dynamics of the physical probability of firms that undertake a stock swap merger is developed through a simple model. Using a sample of 1090 deals from 1992 to 2008, we show how movements in target stock prices are informative of the success or failure of a stock swap merger and how movements in bidder stock prices are informative at the beginning of the deal period . Without any assumption on the convergence of the target stock price to the bid offer, our results share the findings of Samuelson and Rosenthal (1986). According to our results bidder and target price movements represent the "thermometer" of a deal status.

Keywords: Merger arbitrage; probit model (search for similar items in EconPapers)
JEL-codes: G34 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2009-06
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