Share Tendering Strategies and the Success of Hostile Takeover Bids

Posted: 1 Dec 2008

See all articles by Sheridan Titman

Sheridan Titman

University of Texas at Austin - Department of Finance; National Bureau of Economic Research (NBER)

David A. Hirshleifer

University of California, Irvine - Paul Merage School of Business; NBER

Abstract

This paper presents a model of tender offers in which the bid perfectly reveals the bidder's private information about the size of the value improvement that can be generated by a takeover. We argue that bidders with greater improvements will offer higher premia to ensure that sufficient shares are tendered to obtain control. The model relates announcement date returns and takeover success or failure to the amount bid, the initial shareholdings of the bidder, the number of shares the bidder attempts to purchase, the dilution of minority shareholders, and managerial opposition. We show that managerial defensive measures will sometimes increase the probability of the offer's success, either by raising the incentive to bid high or by decreasing the asymmetry of information about the improvement.

Suggested Citation

Titman, Sheridan and Hirshleifer, David A., Share Tendering Strategies and the Success of Hostile Takeover Bids. Journal of Political Economy, Vol. 98, No. 2, pp. 295-324, April 1990. Available at SSRN: https://ssrn.com/abstract=1286270

Sheridan Titman

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-232-2787 (Phone)
512-471-5073 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

David A. Hirshleifer (Contact Author)

University of California, Irvine - Paul Merage School of Business ( email )

Irvine, CA California 92697-3125
United States

HOME PAGE: http://sites.uci.edu/dhirshle/

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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