Bidder Discounts and Target Premia in Takeovers

17 Pages Posted: 12 Nov 2008

See all articles by Boyan Jovanovic

Boyan Jovanovic

New York University - Department of Economics

Serguey Braguinsky

Carnegie Mellon University - Department of Social and Decision Sciences

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Date Written: July 2003

Abstract

On news of a takeover, the sum of the stock-market values of the firms involved often falls, and the value of the acquirer almost always does. Does this mean that takeovers do not raise the values of the firms involved? Not necessarily. We set up a model in which the equilibrium number of takeovers is constrained efficient. Yet, upon news of a takeover, a target s price rises, the bidder s price falls, and, most of the time the joint value of the target and acquirer also falls.

Suggested Citation

Jovanovic, Boyan and Braguinsky, Serguey, Bidder Discounts and Target Premia in Takeovers (July 2003). NYU Working Paper No. S-MF-03-09, Available at SSRN: https://ssrn.com/abstract=1300212

Boyan Jovanovic (Contact Author)

New York University - Department of Economics ( email )

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New York, NY 10012
United States

Serguey Braguinsky

Carnegie Mellon University - Department of Social and Decision Sciences ( email )

Pittsburgh, PA 15213-3890
United States

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