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MicroHoo: Deal failure, industry rivalry, and sources of overbidding

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  • Aktas, Nihat
  • de Bodt, Eric
  • Roll, Richard

Abstract

On February 1, 2008, Microsoft offered $43.7billion for Yahoo. This offer was a milestone in the battle between Microsoft and Google to control the Internet search industry. The announcement accompanied a substantial decrease in Microsoft's stock price. Investors apparently considered the bid too high and doubted Microsoft's ability to create value with Yahoo's assets (the announcement combined returns implied a total value destruction of $13.29billion). Using the abnormal returns pattern of industry firms and customers, this article examines the sources of overbidding. Our analyses indicate that Microsoft's aggressive move is rooted in its rivalry with Google, but the personality traits of the involved CEOs might explain also a portion of the overbidding.

Suggested Citation

  • Aktas, Nihat & de Bodt, Eric & Roll, Richard, 2013. "MicroHoo: Deal failure, industry rivalry, and sources of overbidding," Journal of Corporate Finance, Elsevier, vol. 19(C), pages 20-35.
    • Handle: RePEc:eee:corfin:v:19:y:2013:i:c:p:20-35
    DOI: 10.1016/j.jcorpfin.2012.09.006
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    Cited by:

    1. Mittal, Amit & Garg, Ajay Kumar, 2017. "Private information implications for acquirers and targets in horizontal mergers," MPRA Paper 85355, University Library of Munich, Germany.
    2. Mittal, Amit & Garg, Ajay Kumar, 2017. "Why do acquirers prefer M&A? Evidence from Banks in India," MPRA Paper 85354, University Library of Munich, Germany.
    3. Jeon, Heung-Jae, 2024. "CEO narcissism and asymmetric cost behavior," The North American Journal of Economics and Finance, Elsevier, vol. 70(C).

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    More about this item

    Keywords

    Merger theories; Abnormal returns; Irrational overbidding; Rational overbidding;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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