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The Pricing Effects of Interfirm Cash Tender Offers
Author(s) -
BHAGAT SANJAI,
BRICKLEY JAMES A.,
LOEWENSTEIN URI
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.tb03922.x
Subject(s) - tender offer , unbundling , cash , asset (computer security) , business , financial economics , economics , capital asset pricing model , microeconomics , arbitrage pricing theory , monetary economics , finance , industrial organization , shareholder , corporate governance , computer science , computer security
The tools provided by option‐pricing theory are used to examine the wealth effects of interfirm cash tender offers. The analysis provides evidence consistent with the “synergy” theory of corporate takeovers and has implications concerning the economic effects of regulations of cash tender offers. The analysis further suggests that the market prices information uncertainty in a manner not captured by the standard Capital Asset Pricing Model. The study introduces a technique for unbundling the prices of a primary asset and a contingent claim when only the prices of the combination are observed.