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American Economic Review: Vol. 94 No. 1 (March 2004)
AER Volume. 94, Issue 1 | 
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Bidder Discounts and Target Premia in Takeovers
Article Citation
Jovanovic, Boyan, and
Serguey Braguinsky. 2004. "Bidder Discounts and Target Premia in Takeovers."
The American Economic Review,
94(1): 46-56.
DOI: 10.1257/000282804322970698
DOI: 10.1257/000282804322970698
Abstract
On news of a takeover, 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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Authors
Jovanovic, Boyan
Braguinsky, Serguey
Braguinsky, Serguey
