This thesis presents an empirical investigation of the role of competition in determining
(1) bidder firm behaviour in, and (2) the resulting valuation effects of, corporate
takeovers. The study is based on the most comprehensive sample currently available
of interfirm tender offers for publicly traded U. S. target firms during the period
1971-1990.
Corporate takeover contests differ in complex ways with respect to the asymmetric
information and bargaining environment, distributions of bidder reservation values
and target share ownership, and information acquisition costs. There is substantial
theoretical work examining the strategic role of the choice of payment method, bidder
elimination and target management resistance, and of particular interest in this thesis,
pre-bid acquisition of target shares ("toehold") and its impact on the subsequent
tender offer price.
Despite a voluminous empirical literature on corporate acquisitions, systematic
evidence on the extent and role of bidder toeholds on bidding strategies is sparse.
While the toehold has been shown to be prevalent in takeover contests, the extant
empirical literature contains few results pointing to the strategic role suggested by
theory. The lack of statistical significance may reflect a combination of small samples,
weak experimental design, and biases in estimation. This thesis remedies the small
sample problem by examining more than 1350 takeover contests in the U. S. from
1971 to 1990. The experimental design is improved by including a larger set of
sample controls, and addressing the bias issue by estimating a set of equations which
simultaneously determines the toehold and the takeover premium.
The wealth effects of takeover contests are estimated as a function of toeholds,
the number of bids/bidders, the outcome of the bid, and the target management
response. Other empirical issues, including the effect of toeholds on the probability
of target management resistance and emergence of a second bid in the contest, are
also examined. Finally, a new econometric technique is developed for simultaneously
estimating event probabilities and conditional expected event returns in order to
determine whether entering the takeover auction, and responding to rival bids for the
target shares, on average enhances the wealth of the initial bidders' shareholders.
| Identifer | oai:union.ndltd.org:LACETR/oai:collectionscanada.gc.ca:BVAU.2429/8754 |
| Date | 05 1900 |
| Creators | Betton, Sandra Ann |
| Source Sets | Library and Archives Canada ETDs Repository / Centre d'archives des thèses électroniques de Bibliothèque et Archives Canada |
| Language | English |
| Detected Language | English |
| Type | Electronic Thesis or Dissertation |
| Relation | UBC Retrospective Theses Digitization Project [http://www.library.ubc.ca/archives/retro_theses/] |
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