 The Effects of the Method of Payment and the Type of Offer on Target Returns in Mergers and Tender OffersDavid Y Suk and Hyun Mo Sung The Financial Review, 1997, vol. 32, issue 3, 591-607 Abstract: This paper re-examines the effects of the method of payment and type of offer on target abnormal returns around the takeover announcement, controlling for the target firms institutional ownership. Previous studies suggest the difference in announcement-period target returns between cash offers and stock exchange offers can be explained by the difference in capital gains tax liabilities of the target shareholders and/or the difference in the information effect of the method of payment. The empirical results indicate no relation between bid premiums (or target abnormal returns) and institutional ownership of the target firm in cash offers and a systematic difference in target returns between mergers and tender offers even after controlling for the method of payment. These results are inconsistent with both the tax hypothesis and the information effect hypothesis. The evidence suggests the likelihood of future competition might be higher in tender offers than in mergers. Copyright 1997 by MIT Press. Date: 1997 There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:finrev:v:32:y:1997:i:3:p:591-607 Ordering information: This journal article can be ordered from Access Statistics for this article The Financial Review is currently edited by Cynthia J. Campbell and Arnold R. Cowan More articles in The Financial Review from Eastern Finance Association Contact information at EDIRC. |
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