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

47 Pages Posted: 5 Jun 2012 Last revised: 4 Sep 2015

See all articles by Thomas W. Bates

Thomas W. Bates

Arizona State University - Department of Finance

David Becher

Drexel University

Multiple version iconThere are 2 versions of this paper

Date Written: September 3, 2015


This paper examines management’s motives for rejecting takeover bids and the associated shareholder wealth effects. We develop several measures of initial bid quality and find a significant negative correlation between contested offers and bid quality. The likelihood of higher follow-on offers decreases in bid quality and is greater when targets have classified boards and CEOs have significant personal wealth tied to the transaction. Moreover, 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.

Keywords: classified boards, hostile bids, mergers and acquisitions, CEO turnover

JEL Classification: G34, J33, K22

Suggested Citation

Bates, Thomas W. and Becher, David, Bid Resistance by Takeover Targets: Managerial Bargaining or Bad Faith? (September 3, 2015). Paris December 2012 Finance Meeting EUROFIDAI-AFFI Paper, Available at SSRN: or

Thomas W. Bates (Contact Author)

Arizona State University - Department of Finance ( email )

W. P. Carey School of Business
PO Box 873906
Tempe, AZ 85287-3906
United States

David Becher

Drexel University ( email )

3220 Market Street
1127 Gerri C LeBow Hall
Philadelphia, PA 19104
United States
215-895-2274 (Phone)
215-895-2295 (Fax)

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