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Corporate Takeover Bids, Methods of Payment, and Bidding Firms' Stock Returns
Author(s) -
TRAVLOS NICKOLAOS G.
Publication year - 1987
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1987.tb03921.x
Subject(s) - bidding , tender offer , business , payment , stock (firearms) , cash , monetary economics , common stock , financial economics , finance , economics , shareholder , corporate governance , marketing , paleontology , mechanical engineering , context (archaeology) , biology , engineering
This study explores the role of the method of payment in explaining common stock returns of bidding firms at the announcement of takeover bids. The results reveal significant differences in the abnormal returns between common stock exchanges and cash offers. The results are independent of the type of takeover bid, i.e., merger or tender offer, and of bid outcomes. These findings, supported by analysis of nonconvertible bonds, are attributed mainly to signalling effects and imply that the inconclusive evidence of earlier studies on takeovers may be due to their failure to control for the method of payment.