Preemptive bidding in common value takeover auctions: Social surplus and the target’s revenue

Anna Dodonova and Yuri Khoroshilov

The North American Journal of Economics and Finance, 2020, vol. 53, issue C

Abstract: This paper develops a model of preemptive jump bidding in common value takeover auctions. It shows that, in a case of common values, jump bidding increases the social surplus and, under certain conditions, can lead to a higher expected target’s revenue. It also demonstrates that an increase in investigation costs may improve social efficiency even if it leads to larger direct social costs. Based on the results, the paper provides several implications related to legal fees and the length of the takeover contest.

Keywords: Acquisition; Takeover; Preemptive bidding; Jump bidding; Signalling; Auction (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:53:y:2020:i:c:s1062940820301054

DOI: 10.1016/j.najef.2020.101208

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