Why mergers reduce profits and raise share prices: A theory of preemptive mergers

Arbeitspapier

We explain the empirical puzzle why mergers reduce profits and raise share prices. If being an “insider” is better than being an “outsider,” firms may merge to preempt their partner merging with a rival. The stock-value of the insiders is increased, since the risk of becoming an outsider is eliminated. We also explain why shareholders of targets gain while acquirers typically break even. These results are derived in an endogenousmerger model, predicting the conditions under which mergers occur, when they occur, and how the surplus is shared.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: WZB Discussion Paper ; No. FS IV 01-26

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Oligopoly and Other Imperfect Markets ; Monopolization; Horizontal Anticompetitive Practices ; Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance ; Bargaining Theory; Matching Theory
• Thema: Mergers ; Acquisitions ; Defensive Mergers ; Coalition Formation

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Fridolfsson, Sven-Olof ; Stennek, Johan
• Ereignis: Veröffentlichung
• (wer): Wissenschaftszentrum Berlin für Sozialforschung (WZB)
• (wo): Berlin
• (wann): 2001

Weitere Informationen

• Handle: http://hdl.handle.net/10419/52599
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ