A Test for Price Pressure Effects in Tender Offer Stock Repurchases

Davidson, Wallace N,, Indudeep Chhachhi and John Glascock

The Financial Review, 1996, vol. 31, issue 1, 25-49

Abstract: The evidence in this paper supports the hypothesis that the previously documented stock price reversal following a tender offer announcement is consistent with a price pressure caused by a temporary shift in the security's demand curve. The authors came to this conclusion by redocumenting the price reversal, by finding an increase in trading volume around the tender offer announcement and expiration, by showing the increase in volume to be larger than expected from only an information effect, and by showing that short selling activity increases after the announcement and before the expiration of the tender offer. Copyright 1996 by MIT Press.

Date: 1996
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