Economics at your fingertips  

Bid anticipation, information revelation, and merger gains

Wenyu Wang

Journal of Financial Economics, 2018, vol. 128, issue 2, 320-343

Abstract: Because firms’ takeover motives are unobservable to investors, mergers are only partially anticipated and often appear as mixed blessings for acquirers. I construct and estimate a model to study the causes and consequences of bid anticipation and information revelation in mergers. Controlling for the market’s reassessment of the acquirer’s stand-alone value, I estimate that acquirers gain 4% from a typical merger. The total value of an active merger market averages 13% for acquirers, part of which is capitalized in their pre-merger market values. My model also explains the correlation between announcement returns and firm characteristics, as well as the low predictability of mergers.

Keywords: Mergers and acquisitions; Revelation; Anticipation; Merger gains (search for similar items in EconPapers)
JEL-codes: C51 G34 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

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:

Access Statistics for this article

Journal of Financial Economics is currently edited by G. William Schwert

More articles in Journal of Financial Economics from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2018-12-08
Handle: RePEc:eee:jfinec:v:128:y:2018:i:2:p:320-343