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| Author: | Golbe, D. Schranz, M. |
| Title: | Bidder Incentives for Informed Training Before Hostile Tender Offer Announcements |
| Journal: | Financial Management
1994 : WINTER, VOL. 23:4, p. 57-68 |
| Index terms: | TRADE COMPANIES INCENTIVES |
| Language: | eng |
| Abstract: | Legal constraints that require disclosure of a bid before a controlling interest is purchased give bidders an incentive to tip arbitrageurs before announcement. Because arbitrageurs are likely to have lower private tendering costs than other shareholders, tipping decreases the minimum successful bid price, which increases profits to the bidder. The incentive to leak information is negatively related to the amount of dilution the bidder anticipates, the degree to which the back-end price embeds any pre-announcement price increase arising from additional trading by arbitrageurs, and the size of the bidder 's toehold. |
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