TY - JOUR
T1 - The dynamics of mergers and acquisitions
AU - Morellec, Erwan
AU - Zhdanov, Alexei
N1 - Funding Information:
This paper builds on a paper titled “A Dynamic Analysis of Takeover Deals with Competition and Imperfect Information.” We thank Mike Barclay, Ernst-Ludwig Von Thadden, and the associate editor for helpful comments. We also thank the referee for providing detailed comments and suggesting the solution method to the equilibrium with competition. The first author acknowledges financial support from FAME and from NCCR FINRISK of the Swiss National Science Foundation. Part of this research was done when Morellec was on the faculty of the Simon School of Business at the University of Rochester.
PY - 2005/9
Y1 - 2005/9
N2 - This paper presents a dynamic model of takeovers based on the stock market valuations of merging firms. The model incorporates competition and imperfect information and determines the terms and timing of takeovers by solving option exercise games between bidding and target shareholders. The implications of the model for returns to stockholders are consistent with the available evidence. In addition, the model generates new predictions relating these returns to the drift, volatility and correlation coefficient of the bidder and the target stock returns and to the dispersion of beliefs regarding the benefits of the takeover.
AB - This paper presents a dynamic model of takeovers based on the stock market valuations of merging firms. The model incorporates competition and imperfect information and determines the terms and timing of takeovers by solving option exercise games between bidding and target shareholders. The implications of the model for returns to stockholders are consistent with the available evidence. In addition, the model generates new predictions relating these returns to the drift, volatility and correlation coefficient of the bidder and the target stock returns and to the dispersion of beliefs regarding the benefits of the takeover.
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U2 - 10.1016/j.jfineco.2004.10.009
DO - 10.1016/j.jfineco.2004.10.009
M3 - Article
AN - SCOPUS:23844536081
SN - 0304-405X
VL - 77
SP - 649
EP - 672
JO - Journal of Financial Economics
JF - Journal of Financial Economics
IS - 3
ER -