If at First You Don't Succeed: The Effect of the Option to Resolicit on Corporate Takeovers

Posted: 29 Feb 2008

See all articles by Ann B. Gillette

Ann B. Gillette

Kennesaw State University - Michael J. Coles College of Business; Federal Reserve Banks - Federal Reserve Bank of Atlanta

Thomas H. Noe

University of Oxford - Said Business School; University of Oxford - Balliol College; Bank of Finland; European Corporate Governance Institute

Date Written: 2006

Abstract

This article models, and experimentally simulates, the free-rider problem in a takeover when the raider has the option to "resolicit," that is, to make a new offer after an offer has been rejected. In theory, the option to resolicit, by lowering offer credibility, increases the dissipative losses associated with free riding. The outcomes of our experiment support this prediction and produce losses from free riding even higher than theoretically predicted. These dissipation losses reduce raider gains to less than 3% of synergy value of the acquisition

Suggested Citation

Gillette, Ann Brewer and Noe, Thomas H., If at First You Don't Succeed: The Effect of the Option to Resolicit on Corporate Takeovers ( 2006). The Review of Financial Studies, Vol. 19, Issue 2, pp. 561-603, 2006, Available at SSRN: https://ssrn.com/abstract=900716 or http://dx.doi.org/10.1093/rfs/hhj011

Ann Brewer Gillette (Contact Author)

Kennesaw State University - Michael J. Coles College of Business ( email )

1000 Chastain Road
Kennesaw, GA 30144
United States

Federal Reserve Banks - Federal Reserve Bank of Atlanta

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

Thomas H. Noe

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 3BJ
United Kingdom

University of Oxford - Balliol College ( email )

Broad St
Oxford, OX1 3BJ
United Kingdom

Bank of Finland ( email )

P.O. Box 160
FIN-00101 Helsinki
Finland

European Corporate Governance Institute ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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