Initial Shareholdings and Overbidding in Takeover Contests

Mike Burkart

Journal of Finance, 1995, vol. 50, issue 5, 1491-1515

Abstract: Within the context of takeovers, this paper shows that in private-value auctions the optimal individually rational strategy for a bidder with partial ownership of the item is to overbid, i.e., to bid more than his valuation. This strategy, however, can lead to an inefficient outcome and the winning bidder making a net loss. Further, the overbidding result implies that the presence of a large shareholder increases the bid premium in single-bidder takeovers at the expense of reducing the probability of the takeover actually occurring. Copyright 1995 by American Finance Association.

Date: 1995
References: Add references at CitEc
Citations: View citations in EconPapers (123)

Downloads: (external link)
http://links.jstor.org/sici?sici=0022-1082%2819951 ... O%3B2-I&origin=repec full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:50:y:1995:i:5:p:1491-1515

Ordering information: This journal article can be ordered from
http://www.afajof.org/membership/join.asp

Access Statistics for this article

More articles in Journal of Finance from American Finance Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().