Do breakup fees lead to efficient takeover?

Yeon-Koo Che, Jinwoo Kim and Tracy Lewis

Economics Letters, 2010, vol. 108, issue 1, 52-54

Abstract: We examine the use of breakup fees as a device for target firms to recruit white knights in response to a hostile takeover bid. When bidders have interdependent valuations of the target, the possible use of a breakup fee to subsidize entry of a subsequent bidder overdisciplines the initial bidder's preemption and results in excessive entry by a second bidder.

Keywords: Corporate; takeover; Breakup; fees; Auction; Interdependent; values (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:108:y:2010:i:1:p:52-54

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