The Dynamics of the Free-Rider Problem in Takeovers
Joseph Harrington () and
Jacek Prokop ()
The Review of Financial Studies, 1993, vol. 6, issue 4, 851-82
Abstract:
We explore the dynamics of a takeover bid. In contrast to preceding models, if the initial takeover bid is unsuccessful a raider is allowed to make a new tender offer in order to try and secure the remaining shares. Numerical analysis shows that the raider's tender offer rises over time as he accumulates more shares. The anticipation of a higher tender offer in the future makes shareholders more inclined to bold their shares and forces the raider to offer a higher premium than is predicted by static theories. As the time between tender offers goes to zero, we show analytically that the expected profit from engaging in a takeover goes to zero. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.
Date: 1993
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)
Downloads: (external link)
http://www.jstor.org/fcgi-bin/jstor/listjournal.fcg/08939454 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:oup:rfinst:v:6:y:1993:i:4:p:851-82
Ordering information: This journal article can be ordered from
https://academic.oup.com/journals
Access Statistics for this article
The Review of Financial Studies is currently edited by Itay Goldstein
More articles in The Review of Financial Studies from Society for Financial Studies Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().