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Trading Profits in Dutch Auction Self-Tender Offers

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  • Kadapakkam, Palani-Rajan
  • Seth, Sarabjeet

Abstract

The authors document abnormal trading profits in Dutch auction self-tenders. Tender period profits--buying after announcement and selling just before expiration--are 1.74 percent. Buying just before expiration and tendering yields abnormal profits of 1.36 percent. Total profits from buying just after announcement and tendering remain positive after adjusting for bid-ask spreads. Trading profits are higher for smaller firms and positively correlated with tender period unsystematic risk, suggesting that they arise due to the pricing of event risk. Copyright 1994 by American Finance Association.

Suggested Citation

  • Kadapakkam, Palani-Rajan & Seth, Sarabjeet, 1994. "Trading Profits in Dutch Auction Self-Tender Offers," Journal of Finance, American Finance Association, vol. 49(1), pages 291-306, March.
    • Handle: RePEc:bla:jfinan:v:49:y:1994:i:1:p:291-306
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    Cited by:

    1. Alokparna (Sonia) Basu Monga & Deborah Roedder John, 2008. "WHEN DOES NEGATIVE BRAND PUBLICITY HURT? The Moderating Influence of Analytic Versus Holistic Thinking," Working Papers 0044, College of Business, University of Texas at San Antonio.
    2. Karan Bhanot & Valeria Martinez & Palani-Rajan Kadapakkam & Sinan Yildirim, 2008. "Trading Profits in Closed-End Fund Tender Offers," Working Papers 0048, College of Business, University of Texas at San Antonio.
    3. Ralf Schremper, 2003. "Kapitalmarktrelevanz deutscher Aktienrückkaufprogramme," Schmalenbach Journal of Business Research, Springer, vol. 55(6), pages 578-605, September.
    4. Gray, Wesley, 2005. "Two Essays on Self Tender Offers," MPRA Paper 11919, University Library of Munich, Germany, revised 30 Nov 2005.
    5. Palani-Rajan Kadapakkam & Hongxian Zhang & Sinan Yildirim, 2021. "A reexamination of the tendering profit anomaly," Review of Quantitative Finance and Accounting, Springer, vol. 56(4), pages 1475-1501, May.

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