This paper presents a model of corporate takeovers in a framework of auctions with multidimensional signals. The model considers a target firm whose value for bidders is composed of both common and private values. A symmetric equilibrium is developed where, absent equity components in bidding strategies, inefficient takeovers may take place because aggregate information regarding the common value cannot be utilized to induce the seller to determine the winner. We argue that inefficient takeovers are an artifact of conservative bidding strategies and the pure cash offer. Efficient bidders face a possibility that it will have to overpay and, as a result, they fail to be allocated the target firm with a positive probability. We show that these inefficient takeovers do not take place if bidders are allowed to use ex post payment in addition to cash.
Keywords: conservative bidding; ex post payment; inefficient takeovers; multidimensional signals; takeover contests
JEL classification: D44, G34
학회소식
[2017년 제 3차] CORPORATE TAKEOVERS UNDER MULTI-DIMENSIONAL SIGNALS
작성자 : 관리자
조회수 : 1119
게시일 :
2017-08-31
