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Tobin's Q and the Gains from Takeovers
Author(s) -
SERVAES HENRI
Publication year - 1991
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.1540-6261.1991.tb03758.x
Subject(s) - contest , sample (material) , tender offer , tobin's q , relation (database) , economics , work (physics) , business , monetary economics , econometrics , management , computer science , shareholder , political science , law , physics , database , corporate governance , thermodynamics
This paper analyzes the relation between takeover gains and the q ratios of targets and bidders for a sample of 704 mergers and tender offers over the period 1972–1987. Target, bidder, and total returns are larger when targets have low q ratios and bidders have high q ratios. The relation is strengthened after controlling for the characteristics of the offer and the contest. This evidence confirms the results of the work by Lang, Stulz, and Walkling and shows that their findings also hold for mergers and after controlling for other determinants of takeover gains.