Abstract

http://ssrn.com/abstract=1342203
 
 

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Signaling in Tender Offer Games


Mike Burkart


Swedish House of Finance; Stockholm School of Economics - Department of Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); London School of Economics - Financial Markets (FMG) Group

Samuel Lee


New York University (NYU) - Leonard N. Stern School of Business; European Corporate Governance Institute (ECGI)

December 31, 2012

EFA 2009 Bergen Meetings Paper
FMG Discussion Paper No. 655

Abstract:     
This paper examines how the interaction of bidder's private information and target shareholders' free-riding behavior affects the equilibrium outcomes and bid design in tender offers. While pooling equilibria always exist, separating ones emerge only in two scenarios. First, the bidder can reveal her type if she can commit to extract private benefits in a manner that is informative about the post-takeover security benefits. We discuss which exclusion mechanisms in practice satisfy these requirements. Second, allowing the bidder to use securities other than equity to unbundle cash flow and voting rights overcomes all frictions. Offers that include derivatives allow for perfect revelation and implement the symmetric information outcome.

Keywords: Signaling, Free-Rider Problem, Means of Payment, Restricted Bids, Two-dimensional Types

JEL Classification: G32

working papers series





Not Available For Download

Date posted: February 13, 2009 ; Last revised: October 9, 2013

Suggested Citation

Burkart, Mike and Lee, Samuel, Signaling in Tender Offer Games (December 31, 2012). EFA 2009 Bergen Meetings Paper. Available at SSRN: http://ssrn.com/abstract=1342203 or http://dx.doi.org/10.2139/ssrn.1342203

Contact Information

Mike C. Burkart (Contact Author)
Swedish House of Finance ( email )
Drottninggatan 98
111 60 Stockholm
Sweden

Stockholm School of Economics - Department of Finance ( email )
P.O. Box 6501
Sveavagen 65
SE-113 83 Stockholm
Sweden
+46 8 736 9678 (Phone)
+46 8 31 6422 (Fax)
HOME PAGE: http://www.hhs.se/Finance/People/ShowPerson.htm?personid=54
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
HOME PAGE: http://www.cepr.org/default_static.htm
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
London School of Economics - Financial Markets (FMG) Group
Houghton Street
London WC2A 2AE
United Kingdom
HOME PAGE: http://www.lse.ac.uk/collections/finance/facultyAndStaff/profiles/mikeBurkart.htm
Samuel Lee
New York University (NYU) - Leonard N. Stern School of Business ( email )
44 West 4th Street
New York, NY NY 10012
United States
European Corporate Governance Institute (ECGI) ( email )
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
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