Managerial Performance, Bid Premiums, and the Characteristics of Takeover Targets

Chao Chen and Philippe Cornu
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Chao Chen: Center for China Finance and Business Research and Department of Finance, California State University
Philippe Cornu: Department of Finance, University of Geneva

Annals of Economics and Finance, 2002, vol. 3, issue 1, 67-84

Abstract: This paper tests the inefficient performance hypothesis and the pre-bid runup premium hypothesis of hostile takeovers. The long-term and short-term performance and the characteristics of friendly and hostile takeovers are compared. We find no indications of poor target performance over the five years prior to the takeover announcement. However, there is evidence that hostile takeovers do perform a correction for target managerial failure. This paper also finds that the type of offer is strongly related to the general trend of the M&A market and the size, and industry of the target firm. Higher takeover premiums and cash offers are more often associated with hostile offers. Moreover, the odds for hostile offers to incur competition among bidders and to be unsuccessful are significantly higher than that for friendly offers.

Keywords: Hostile takeover; Managerial performance; Bid premium (search for similar items in EconPapers)
JEL-codes: G34 (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:cuf:journl:y:2002:v:3:i:1:p:67-84

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