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| Author: | Giliberto, S. M. Varaiya, N. P. |
| Title: | The winner's curse and bidder competition in acquisitions : evidence from failed bank auctions. |
| Journal: | Journal of Finance
1989 : MAR, VOL. 44:1, p. 59-75 |
| Index terms: | MERGERS BIDDING BANK FAILURES PREDICTION THEORY |
| Language: | eng |
| Abstract: | The effect of bidder competition in acquisitions is examined. Predictions from auction theory is used to test if buyers of failed banks overpay /the "winner's course"/ when bidding in Federal Deposit Insurance Corporation sealed-bid purchase and assumption transactions. The results indicate that winning bids tend to increase as the number of competitors increases, as predicted by the theory. It is also found that bid levels of all bidders increase with increased competition which is consistent with bidders' failing the adjust for the winner's course in a common value auction setting. However, additional tests using winning bids only are consistent with both a common value and a private value model. |
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