Do Bidder Managers Knowingly Pay Too Much for Target Firms?

H Nejat Seyhun

The Journal of Business, 1990, vol. 63, issue 4, 439-64

Abstract: This study examines the stock transactions of top managers of bidder firms for their personal accounts as signals about their motivations regarding corporate takeovers. Overall, the data indicate that, prior to takeover announcements, top managers increase their net purchases rather than sales. Bidder managers purchase more shares when the stock price reaction to the takeover announcement is large and positive than when it is large and negative. Bidder managers are also more optimistic in cash offers than in equity offers. Overall, the evidence does not appear to support the hypothesis that bidder managers knowingly pay too much for target firms. Copyright 1990 by the University of Chicago.

Date: 1990
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