Trading Profits in Dutch Auction Self-Tender Offers

Posted: 29 Jul 2001

See all articles by Palani-Rajan Kadapakkam

Palani-Rajan Kadapakkam

University of Texas at San Antonio - Department of Finance

Sarabjeet Seth

affiliation not provided to SSRN

Abstract

We document abnormal trading profits in Dutch auction self-tenders. Tender period profits buying after announcement and selling just before expiration are 1.74 percent (Bhagat, Brickley, and Lowenstein (1987) report similar profits for interfirm tenders). Buying just before expiration and tendering yields abnormal profits of 1.36 percent (Lakonishok and Vermaelen (1990) report 9 percent for fixed-price self-tenders using a filter rule). Total profits from buying just after announcement and tendering remain positive after adjusting for bid-ask spreads. Trading profits are higher for smaller firms, and positively correlated with tender period unsystematic risk, suggesting that they arise due to the pricing of event risk.

JEL Classification: G12, G14

Suggested Citation

Kadapakkam, Palani-Rajan and Seth, Sarabjeet, Trading Profits in Dutch Auction Self-Tender Offers. Available at SSRN: https://ssrn.com/abstract=5303

Palani-Rajan Kadapakkam

University of Texas at San Antonio - Department of Finance ( email )

San Antonio, TX 78249
United States

Sarabjeet Seth (Contact Author)

affiliation not provided to SSRN

No Address Available

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
998
PlumX Metrics