IDEAS home Printed from https://ideas.repec.org/a/bla/finrev/v50y2015i3p275-300.html
   My bibliography  Save this article

Reference Point Theory and Pursuit of Deals

Author

Listed:
  • Inga Chira
  • Jeff Madura

Abstract

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.

Suggested Citation

  • Inga Chira & Jeff Madura, 2015. "Reference Point Theory and Pursuit of Deals," The Financial Review, Eastern Finance Association, vol. 50(3), pages 275-300, August.
    • Handle: RePEc:bla:finrev:v:50:y:2015:i:3:p:275-300
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1111/fire.12067
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Shaojie Lai & Xiaoling Pu & Qing (Sophie) Wang & Jianing Zhang, 2023. "Reference prices and withdrawn acquisitions," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(4), pages 4365-4384, October.
    2. Smith, Garrett C. & Coy, Jeffrey M. & Spieler, Andrew C., 2019. "Cross-border transactions, mergers and the inconsistency of international reference points," Journal of Behavioral and Experimental Finance, Elsevier, vol. 22(C), pages 14-21.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:finrev:v:50:y:2015:i:3:p:275-300. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/efaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.