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American Economic Review: Vol. 94 No. 1 (March 2004)

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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." American Economic Review, 94(1): 46-56.

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


American Economic Review


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