Bargaining merger terms and the effect on the announcement returns

Bibliographic Details
Main Author: Pereira, Paulo J.
Publication Date: 2019
Other Authors: Rodrigues, Artur
Format: Article
Language: eng
Source: Repositórios Científicos de Acesso Aberto de Portugal (RCAAP)
Download full: https://hdl.handle.net/1822/65726
Summary: This paper develops a dynamic model for the timing and terms of mergers. In contrast to other models, we show that firms agree about the timing independently from how the merger surplus is shared or their bargaining power. We show that, under asymmetry of information, the combination of surprises on the merger timing and the merger terms, can produce negative or positive abnormal announcement returns for the merging firms. The abnormal returns are also possible under perfect information, even if the announcements are expected by the market, and occur as a result of the event-study methodology.
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spelling Bargaining merger terms and the effect on the announcement returnsMerger termsMerger timingBargainingUncertaintyReal optionsEvent studiesCiências Sociais::Economia e GestãoSocial SciencesThis paper develops a dynamic model for the timing and terms of mergers. In contrast to other models, we show that firms agree about the timing independently from how the merger surplus is shared or their bargaining power. We show that, under asymmetry of information, the combination of surprises on the merger timing and the merger terms, can produce negative or positive abnormal announcement returns for the merging firms. The abnormal returns are also possible under perfect information, even if the announcements are expected by the market, and occur as a result of the event-study methodology.This research has been financed by the European Regional Development Fund through COMPETE 2020 -Programa Operacional Competitividade e Internacionalizacho (POCI) and by Portuguese public funds through FCT in the framework of the projects POCI-01-0145-FEDER-006683 (Artur Rodrigues) and POCI-01-0145-FEDER-006890 (Paulo J. Pereira). We thank Alcino Azevedo, Bart Lambrecht, Dean Paxson, Elmar Lukas, Luis Aguiar-Conraria, Rosa Branca-Esteves, and participants of the 2015 Annual Real Options Conference for their helpful comments. Any remaining errors are the sole responsibility of the authors.Elsevier Science BVUniversidade do MinhoPereira, Paulo J.Rodrigues, Artur2019-01-012019-01-01T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttps://hdl.handle.net/1822/65726engPereira, P. J., & Rodrigues, A. (2019, January). Bargaining merger terms and the effect on the announcement returns. International Review of Economics & Finance. Elsevier BV. http://doi.org/10.1016/j.iref.2018.10.0151059-056010.1016/j.iref.2018.10.015https://www.sciencedirect.com/science/article/pii/S1059056017302484info:eu-repo/semantics/openAccessreponame:Repositórios Científicos de Acesso Aberto de Portugal (RCAAP)instname:FCCN, serviços digitais da FCT – Fundação para a Ciência e a Tecnologiainstacron:RCAAP2025-04-12T04:52:33Zoai:repositorium.sdum.uminho.pt:1822/65726Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireinfo@rcaap.ptopendoar:https://opendoar.ac.uk/repository/71602025-05-28T15:44:48.905504Repositórios Científicos de Acesso Aberto de Portugal (RCAAP) - FCCN, serviços digitais da FCT – Fundação para a Ciência e a Tecnologiafalse
dc.title.none.fl_str_mv Bargaining merger terms and the effect on the announcement returns
title Bargaining merger terms and the effect on the announcement returns
spellingShingle Bargaining merger terms and the effect on the announcement returns
Pereira, Paulo J.
Merger terms
Merger timing
Bargaining
Uncertainty
Real options
Event studies
Ciências Sociais::Economia e Gestão
Social Sciences
title_short Bargaining merger terms and the effect on the announcement returns
title_full Bargaining merger terms and the effect on the announcement returns
title_fullStr Bargaining merger terms and the effect on the announcement returns
title_full_unstemmed Bargaining merger terms and the effect on the announcement returns
title_sort Bargaining merger terms and the effect on the announcement returns
author Pereira, Paulo J.
author_facet Pereira, Paulo J.
Rodrigues, Artur
author_role author
author2 Rodrigues, Artur
author2_role author
dc.contributor.none.fl_str_mv Universidade do Minho
dc.contributor.author.fl_str_mv Pereira, Paulo J.
Rodrigues, Artur
dc.subject.por.fl_str_mv Merger terms
Merger timing
Bargaining
Uncertainty
Real options
Event studies
Ciências Sociais::Economia e Gestão
Social Sciences
topic Merger terms
Merger timing
Bargaining
Uncertainty
Real options
Event studies
Ciências Sociais::Economia e Gestão
Social Sciences
description This paper develops a dynamic model for the timing and terms of mergers. In contrast to other models, we show that firms agree about the timing independently from how the merger surplus is shared or their bargaining power. We show that, under asymmetry of information, the combination of surprises on the merger timing and the merger terms, can produce negative or positive abnormal announcement returns for the merging firms. The abnormal returns are also possible under perfect information, even if the announcements are expected by the market, and occur as a result of the event-study methodology.
publishDate 2019
dc.date.none.fl_str_mv 2019-01-01
2019-01-01T00:00:00Z
dc.type.status.fl_str_mv info:eu-repo/semantics/publishedVersion
dc.type.driver.fl_str_mv info:eu-repo/semantics/article
format article
status_str publishedVersion
dc.identifier.uri.fl_str_mv https://hdl.handle.net/1822/65726
url https://hdl.handle.net/1822/65726
dc.language.iso.fl_str_mv eng
language eng
dc.relation.none.fl_str_mv Pereira, P. J., & Rodrigues, A. (2019, January). Bargaining merger terms and the effect on the announcement returns. International Review of Economics & Finance. Elsevier BV. http://doi.org/10.1016/j.iref.2018.10.015
1059-0560
10.1016/j.iref.2018.10.015
https://www.sciencedirect.com/science/article/pii/S1059056017302484
dc.rights.driver.fl_str_mv info:eu-repo/semantics/openAccess
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv application/pdf
dc.publisher.none.fl_str_mv Elsevier Science BV
publisher.none.fl_str_mv Elsevier Science BV
dc.source.none.fl_str_mv reponame:Repositórios Científicos de Acesso Aberto de Portugal (RCAAP)
instname:FCCN, serviços digitais da FCT – Fundação para a Ciência e a Tecnologia
instacron:RCAAP
instname_str FCCN, serviços digitais da FCT – Fundação para a Ciência e a Tecnologia
instacron_str RCAAP
institution RCAAP
reponame_str Repositórios Científicos de Acesso Aberto de Portugal (RCAAP)
collection Repositórios Científicos de Acesso Aberto de Portugal (RCAAP)
repository.name.fl_str_mv Repositórios Científicos de Acesso Aberto de Portugal (RCAAP) - FCCN, serviços digitais da FCT – Fundação para a Ciência e a Tecnologia
repository.mail.fl_str_mv info@rcaap.pt
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