Braking the Merger Momentum: Reforming Corporate Law Governing Mega-Mergers

Fanto, James A.

doi:10.2139/ssrn.223149

Cited by 4 publications

(1 citation statement)

References 3 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Odean () confirms their explanation by empirically testing the behavior of 10,000 investment accounts in a large brokerage house. Fanto () notes that a company's board is in a better legal position when planning to bid for a target if it uses the prices from recent similar mergers as reference points. While investigating the impact of psychological biases on capital budgeting decisions, Gervais and Goldstein (2007) find that managers with access to their firms’ free cash flows overinvest, engage in more acquisitions, and invest in more new projects.…”

Section: Introductionmentioning

confidence: 99%

Reference Point Theory and Pursuit of Deals

Chira

Madura

2015

The Financial Review

View full text Add to dashboard Cite

Target and bidder reference points have separate and joint effects on merger deals. A firm whose stock price is more distant from its 52-week high reference point is less likely to attract bids but has a greater likelihood of being acquired by its own managers (vs unaffiliated bidders). Firm propensity to submit a bid increases if its prevailing stock price is closer to its 52-week high. When both parties' reference points are close to their current stock prices, they are more willing to complete a deal. Hostile deals result when the bidder's stock price is closer to its reference point.

show abstract

Section: Introductionmentioning

confidence: 99%