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Do Termination Provisions Truncate the Takeover Bidding Process?

Author

Listed:
  • Audra L. Boone
  • J. Harold Mulherin

Abstract

We provide new evidence on termination provisions and the takeover bidding process. Our central contribution is a novel database from Securities and Exchange Commission (SEC) documents that accurately measures the incidence of termination provisions and the depth of competition in takeover deals. We show that biased data in prior research produced incorrect conclusions on the relation between termination provisions and judicial decisions, bidder toeholds, and deal size. Our comprehensive data also show that termination provisions are positively related to takeover competition. Our evidence is consistent with the information/commitment hypothesis in which termination provisions do not truncate bidding but instead culminate the takeover process.

Suggested Citation

  • Audra L. Boone & J. Harold Mulherin, 2007. "Do Termination Provisions Truncate the Takeover Bidding Process?," The Review of Financial Studies, Society for Financial Studies, vol. 20(2), pages 461-489.
    • Handle: RePEc:oup:rfinst:v:20:y:2007:i:2:p:461-489.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhl009
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    More about this item

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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