Takeovers and Divergence of Investor Opinion
|Abstract:||We test several hypotheses on how takeover premium is related to investors’ divergence of opinion on the target’s equity value. We show that the total takeover premium, the pre-announcement target stock price runup and the post-announcement stock price markup are all higher when investors have higher divergence of opinion. Identical results obtain with higher market-level investor sentiment. When divergence of opinion is higher, a firm is less likely to be a takeover target, although takeover synergy in successful takeovers is higher. Our results suggest that takeovers may play a role in explaining high contemporaneous stock prices in the presence of high divergence of investor opinion.|
|Appears in Collections:||Finance Working Papers|
Files in This Item:
|Chatterjee&John&Yan_25 August 2011.pdf||Main Working Paper||452.32 kB||Adobe PDF||View/Open|
Items in FDA are protected by copyright, with all rights reserved, unless otherwise indicated.