Corporate Takeover Bids, Methods of Payment, and Bidding Firms' Stock Returns

Nickolaos G Travlos

Journal of Finance, 1987, vol. 42, issue 4, 943-63

Abstract: This study explores the role of the method of payment in explaining common stock returns of bidding firms at the announcement of takeover bids. The results reveal significant differences in the abnormal returns between common stock exchanges a nd cash offers. The results are independent of the type of takeover b id, i.e., merger or tender offer, and of bid outcomes. These findings supported by analysis of nonconvertible bonds, are attributed mainl y to signaling effects and imply that the inconclusive evidence of ea rlier studies on takeovers may be due to their failure to control for the method of payment. Copyright 1987 by American Finance Association.

Date: 1987
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