Reference prices and withdrawn acquisitions

Shaojie Lai, Xiaoling Pu, Qing (Sophie) Wang and Jianing Zhang

International Journal of Finance & Economics, 2023, vol. 28, issue 4, 4365-4384

Abstract: Using a sample of 1525 withdrawn deals from 1981 to 2015 in the United States, we find that target firms close to their 52‐week high prices after merger announcements have lower withdrawal probabilities. The effect is different across merger waves. The out‐wave deals are sensitive to the target reference prices while in‐wave deals are not. Moreover, targets with post‐announcement prices close to 52‐week high tend to have higher withdrawn returns and receive higher adjustments of offering prices in renegotiation. Overall, our results suggest that target post‐announcement stock prices significantly affect deal outcomes.

Date: 2023
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