Bid Resistance by Takeover Targets: Managerial Bargaining or Bad Faith?

Thomas Bates, David A. Becher

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

This paper examines management's motives for rejecting takeover bids and the associated shareholder wealth effects. We develop measures of initial bid quality and find a significant negative correlation between the quality of a bid and rejection. The likelihood of higher follow-on offers decreases with bid quality and is greater when targets have classified boards and chief executive officers (CEOs) with significant personal wealth tied to the transaction. Target CEOs who fail to close high-quality offers experience a significant rate of forced turnover. Overall, the results support a price improvement motive for contested bids.

Original languageEnglish (US)
Pages (from-to)837-866
Number of pages30
JournalJournal of Financial and Quantitative Analysis
Volume52
Issue number3
DOIs
StatePublished - Jun 1 2017

Fingerprint

Bid
Faith
Chief executive officer
Price improvement
Shareholder wealth
Takeover bids
Wealth
Turnover
Wealth effect

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

Cite this

Bid Resistance by Takeover Targets : Managerial Bargaining or Bad Faith? / Bates, Thomas; Becher, David A.

In: Journal of Financial and Quantitative Analysis, Vol. 52, No. 3, 01.06.2017, p. 837-866.

Research output: Contribution to journalArticle

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