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A Theory of Preemptive Takeover Bidding, RAND Journal of Economics

Abstract

This article develops a model of the takeover bidding process. The model can be described as a form of auction in which a bidder can acquire costly information after the bidding has begun. Implications concerning the interrelationships between bidders' and targets' profits, bidders' initial offers, single and multiple bidder contests, and the effects of takeover legislation are developed. Additionally, the model provides a rationale for bidders to make high premium ("preemptive") initial bids, rather than making low initial bids and raising them if there is competition.

Type

Article

Author(s)

Michael J. Fishman

Date Published

1988

Citations

Fishman, J. Michael. 1988. A Theory of Preemptive Takeover Bidding. RAND Journal of Economics. 19(1): 88-101.

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