IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v117y2012i2p386-388.html
   My bibliography  Save this article

Toeholds and signalling in takeover auctions

Author

Listed:
  • Dodonova, Anna

Abstract

This paper presents a model of preemptive bidding in takeover auctions with toeholds. It shows that when the first bidder owns a fraction of the target firm he is more likely to deter competition and a smaller jump bid is required to do so. It also shows that in the presence of the toehold, the signalling equilibrium reduces the social surplus while it has no effect on the social surplus in the absence of the toehold.

Suggested Citation

  • Dodonova, Anna, 2012. "Toeholds and signalling in takeover auctions," Economics Letters, Elsevier, vol. 117(2), pages 386-388.
    • Handle: RePEc:eee:ecolet:v:117:y:2012:i:2:p:386-388
    DOI: 10.1016/j.econlet.2012.06.023
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165176512003552
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econlet.2012.06.023?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

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

    References listed on IDEAS

    as
    1. Jeremy Bulow & Ming Huang & Paul Klemperer, 1999. "Toeholds and Takeovers," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 427-454, June.
    2. Grossman, Sanford J. & Perry, Motty, 1986. "Perfect sequential equilibrium," Journal of Economic Theory, Elsevier, vol. 39(1), pages 97-119, June.
    3. Hirshleifer, David, 1989. "Facilitation of Competing Bids and the Price of a Takeover Target," University of California at Los Angeles, Anderson Graduate School of Management qt2496649g, Anderson Graduate School of Management, UCLA.
    4. Dodonova, Anna & Khoroshilov, Yuri, 2006. "Jump bidding in takeover auctions," Economics Letters, Elsevier, vol. 92(3), pages 339-341, September.
    5. Michael J. Fishman, 1988. "A Theory of Preemptive Takeover Bidding," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 88-101, Spring.
    Full references (including those not matched with items on IDEAS)

    Citations

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


    Cited by:

    1. Lacerda, José & Pereira, Paulo J. & Rodrigues, Artur, 2021. "Toehold acquisitions as option games," Economics Letters, Elsevier, vol. 209(C).
    2. Khoroshilov, Yuri, 2012. "Preemptive bidding in takeover auctions with affiliated values," The Quarterly Review of Economics and Finance, Elsevier, vol. 52(4), pages 395-401.
    3. Dodonova, Anna, 2017. "Preemptive bidding and Pareto efficiency in takeover auctions," Economics Letters, Elsevier, vol. 159(C), pages 214-216.
    4. Yuri Khoroshilov, 2018. "Partnership Dissolution: Information and Efficiency+," Decision Analysis, INFORMS, vol. 15(3), pages 133-138, September.
    5. Dodonova, Anna & Khoroshilov, Yuri, 2014. "Can preemptive bidding in takeover auctions be socially optimal? Yes it can," The North American Journal of Economics and Finance, Elsevier, vol. 27(C), pages 34-47.
    6. Dodonova, Anna, 2013. "Preemptive bidding in takeover auctions with externality," Journal of Economics and Business, Elsevier, vol. 69(C), pages 35-44.
    7. Dodonova, Anna & Khoroshilov, Yuri, 2020. "Preemptive bidding in common value takeover auctions: Social surplus and the target’s revenue," The North American Journal of Economics and Finance, Elsevier, vol. 53(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Khoroshilov, Yuri, 2012. "Preemptive bidding in takeover auctions with affiliated values," The Quarterly Review of Economics and Finance, Elsevier, vol. 52(4), pages 395-401.
    2. Dodonova, Anna & Khoroshilov, Yuri, 2014. "Can preemptive bidding in takeover auctions be socially optimal? Yes it can," The North American Journal of Economics and Finance, Elsevier, vol. 27(C), pages 34-47.
    3. Jeremy Bulow & Paul Klemperer, 2007. "When are Auctions Best?," Economics Papers 2007-W03, Economics Group, Nuffield College, University of Oxford.
    4. Jeremy Bulow & Paul Klemperer, 2009. "Why Do Sellers (Usually) Prefer Auctions?," American Economic Review, American Economic Association, vol. 99(4), pages 1544-1575, September.
    5. Dimopoulos, Theodosios & Sacchetto, Stefano, 2014. "Preemptive bidding, target resistance, and takeover premiums," Journal of Financial Economics, Elsevier, vol. 114(3), pages 444-470.
    6. Khoroshilov, Yuri & Dodonova, Anna, 2007. "Takeover auctions with actively participating targets," The Quarterly Review of Economics and Finance, Elsevier, vol. 47(2), pages 293-311, May.
    7. Dodonova, Anna, 2013. "Preemptive bidding in takeover auctions with externality," Journal of Economics and Business, Elsevier, vol. 69(C), pages 35-44.
    8. At, Christian & Morand, Pierre-Henri, 2008. "Jump bidding in ascending auctions: The case of takeover contests," Economics Letters, Elsevier, vol. 99(3), pages 458-460, June.
    9. Dodonova, Anna, 2017. "Preemptive bidding and Pareto efficiency in takeover auctions," Economics Letters, Elsevier, vol. 159(C), pages 214-216.
    10. Goldman, Eitan & Qian, Jun, 2005. "Optimal toeholds in takeover contests," Journal of Financial Economics, Elsevier, vol. 77(2), pages 321-346, August.
    11. Schneck, Colin & Bessler, Wolfgang & Zimmermann, Jan, 2014. "Bidder Contests in International Mergers and Acquisitions: The Impact of Toeholds, Preemptive Bidding, and Termination Fees," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100493, Verein für Socialpolitik / German Economic Association.
    12. Yeon-Koo Che & Tracy R. Lewis, 2007. "The role of lockups in takeover contests," RAND Journal of Economics, RAND Corporation, vol. 38(3), pages 648-669, September.
    13. Bessler, Wolfgang & Schneck, Colin & Zimmermann, Jan, 2015. "Bidder contests in international mergers and acquisitions: The impact of toeholds, preemptive bidding, and termination fees," International Review of Financial Analysis, Elsevier, vol. 42(C), pages 4-23.
    14. Dasgupta, Sudipto & Tsui, Kevin, 2003. "A "matching auction" for targets with heterogeneous bidders," Journal of Financial Intermediation, Elsevier, vol. 12(4), pages 331-364, October.
    15. Khoroshilov, Yuri, 2015. "An experimental study of signaling in auctions with a flexible reserve price," The North American Journal of Economics and Finance, Elsevier, vol. 34(C), pages 124-137.
    16. Dodonova, Anna & Khoroshilov, Yuri, 2006. "Jump bidding in takeover auctions," Economics Letters, Elsevier, vol. 92(3), pages 339-341, September.
    17. Rasmusen Eric Bennett, 2006. "Strategic Implications of Uncertainty over One's Own Private Value in Auctions," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 6(1), pages 1-24, November.
    18. Loyola, Gino, 2012. "Optimal and efficient takeover contests with toeholds," Journal of Financial Intermediation, Elsevier, vol. 21(2), pages 203-216.
    19. Becht, Marco & Bolton, Patrick & Roell, Ailsa, 2003. "Corporate governance and control," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 1, pages 1-109, Elsevier.
    20. Robert Marquez & Bilge Yılmaz, 2012. "Takeover Bidding and Shareholder Information," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 1(1), pages 1-27.

    More about this item

    Keywords

    Jump bidding; Toeholds; Takeover auction;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

    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:eee:ecolet:v:117:y:2012:i:2:p:386-388. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    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.