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Entry and competition in takeover auctions

Gentry, Matthew and Stroup, Caleb (2018) Entry and competition in takeover auctions. Journal of Financial Economics. ISSN 0304-405X

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Identification Number: 10.1016/j.jfineco.2018.10.007

Abstract

We estimate the degree of uncertainty faced by potential bidders in takeover auctions and quantify how it affects prices in auctions and negotiations. The high degree of uncertainty revealed by our structural estimation encourages entry in auctions but reduces a target’s bargaining power in negotiations. In the aggregate, auctions and negotiations produce similar prices, even though auctions are preferred in takeover markets with high uncertainty, while the reverse is true for negotiations. Firm characteristics predict pre-entry uncertainty and thus are informative about the relative performance of auctions and negotiations for individual targets.

Item Type: Article
Official URL: https://www.sciencedirect.com/journal/journal-of-f...
Additional Information: © 2018 Elsevier B. V.
Divisions: Economics
Subjects: H Social Sciences > HC Economic History and Conditions
JEL classification: G - Financial Economics > G0 - General
Sets: Departments > Economics
Date Deposited: 19 Nov 2018 15:08
Last Modified: 17 Dec 2018 15:07
URI: http://eprints.lse.ac.uk/id/eprint/90604

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