Mark-Up Pricing in Mergers and Acquisitions

G. Schwert

No 4863, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper studies the premiums paid in successful tender offers and mergers involving NYSE and Amex-listed target firms from 1975-91 in relation to pre-announcement stock price runups. It has been conventional to measure corporate control premiums including the price runups that occur before the initial formal bid. There has been little evidence on the relation between the pre-bid runup and the post-announcement premium (the premium paid to target stockholders measured from the date of the first bid). Under what circumstances are runups associated with larger total premiums? The evidence in this paper shows that in most cases, the pre-bid runup and the post- announcement premium are uncorrelated (i.e. little or no substitution between the runup and the post-announcement premium), so the runup is an added cost to the bidder. This has important implications for assessing the costs of illegal insider trading based on private information about a potential bid.

Date: 1994-09
Note: AP
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Published as Journal of Financial Economics, vol. 41, no. 2, pp. 153-192, June 1992.

Downloads: (external link)
http://www.nber.org/papers/w4863.pdf (application/pdf)

Related works:
Journal Article: Markup pricing in mergers and acquisitions (1996)
Working Paper: Mark-up Pricing in Mergers and Acquisitions (1994)
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:nbr:nberwo:4863

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w4863

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().