NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Bidder Discounts and Target Premia in Takeovers

Boyan Jovanovic, Serguey Braguinsky

NBER Working Paper No. 9009
Issued in June 2002
NBER Program(s):   AP   CF

When a takeover is announced, the sum of the stock-market values of the firms involved often falls, and the value of the acquirer almost always does. Does this mean that takeovers do not raise the values of the firms involved? Not necessarily. We set up a model in which the equilibrium number of takeovers is constrained efficient. Yet, upon news of a takeover, a target's price rises, the bidder's price falls, and, most of the time the joint value of the target and acquirer also falls.

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Document Object Identifier (DOI): 10.3386/w9009

Published: Jovanovic, Boyan and Serguey Braguinsky. "Bidder Discounts And Target Premia In Takeovers," American Economic Review, 2004, v94(1,Mar), 46-56. citation courtesy of

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