Repetition, reputation, and raiding |
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Authors: | Leach JC |
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Institution: | Department of Finance, Wharton School, Philadelphia, PA 19104-6367, USA |
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Abstract: | I develop a multitarget takeover model with bid revisions, inwhich bidders desire a reputation for having low valuations.Such a reputation increases the likelihood that future targetswill accept low premium bids. Bidders develop reputation byusing low take-it-or-leave-it offers. Consequently, tender premiums,bid revision rates, and success rates are lower for continuingbidders than for those considering only a single target. Successrates vary within a series, and reputation building is morelikely with highly correlated target valuations. I provide anexploratory empirical analysis consistent with lower premiumsfrom continuing bidders and discuss some resulting implicationisregarding 'raiders', conglomerates, and resistance strategies. |
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