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- Title
What is the Price of Hubris? Using Takeover Battles to Infer Overpayments and Synergies.
- Authors
Hietala, Pekka; Kaplan, Steven N.; Robinson, David T.
- Abstract
We present a framework for determining the information that can be extracted from stock prices around takeover contests. In only two types of cases is it theoretically possible to use stock price movements to infer bidder overpayment and relative synergies. Even in these two cases, we argue that it is practically difficult to extract this information. We, illustrate one of these generic cases using the takeover contest for Paramount in 1994 in which Viacom overpaid by more than $2 billion. Our findings are consistent with managerial overconfidence and/or large private benefits, but not with the traditional agency-based incentive problem.
- Subjects
STOCK prices; MERGERS &; acquisitions; PARAMOUNT Pictures Corp.; VIACOM International Inc.; BUSINESS enterprises
- Publication
Financial Management (Wiley-Blackwell), 2003, Vol 32, Issue 3, p5
- ISSN
0046-3892
- Publication type
Article
- DOI
10.2307/3666381