Disentangling Target Motives and Bidders’ Selection of Targets

Washington Area Research Symposium Paper 2017

AAA Annual Meeting Paper 2017

55 Pages Posted: 25 Aug 2017 Last revised: 30 Aug 2018

See all articles by Jenny Zha Giedt

Jenny Zha Giedt

George Washington University - School of Business

Date Written: August 15, 2018

Abstract

Prior papers characterizing takeover targets do not address the possibility that certain attributes affect the selling firm’s volition to seek its sale while opposite attributes are sought by bidders. Using a sample of potential target firms that volitionally put themselves up for sale, I find that firms that seek strategic alternatives are performing poorly and have governance incentives to maximize shareholder value. In contrast, the subset of firms that receive bids have relatively better growth and performance, and lower market risk. It appears that, given their choices, bidders do not select under-performing targets, but that potential target firms discipline themselves.

Keywords: strategic alternatives; mergers and acquisitions; takeovers; target motives; target selection

JEL Classification: D84, G34

Suggested Citation

Zha Giedt, Jenny, Disentangling Target Motives and Bidders’ Selection of Targets (August 15, 2018). Washington Area Research Symposium Paper 2017; AAA Annual Meeting Paper 2017. Available at SSRN: https://ssrn.com/abstract=3024398 or http://dx.doi.org/10.2139/ssrn.3024398

Jenny Zha Giedt (Contact Author)

George Washington University - School of Business ( email )

Washington, DC 20052
United States

HOME PAGE: http://www.jennyzha.com

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