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Initial Offer Precision and M&A Outcomes

Petri Hukkanen and Matti Keloharju

Financial Management, 2019, vol. 48, issue 1, 291-310

Abstract: Building on recent research in social psychology, this paper analyzes the link between the precision of initial cash offers and mergers and acquisition (M&A) outcomes. About one‐half of the offers are made at the precision of one or five dollars per share, while an additional one‐third are made at the precision of a half dollar or one quarter. The practice of making offers at round price‐per‐share levels is associated with a higher purchase price for target shares and a lower probability of deal completion.

Date: 2019
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Handle: RePEc:bla:finmgt:v:48:y:2019:i:1:p:291-310