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Takeovers and the Dynamics of Information Flows

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  • Chemla, Gilles

Abstract

This Paper analyses the effect of a possible takeover on information flows and on the terms of trade in business relationships. We consider a long-term relationship between a firm and a privately-informed stakeholder, a buyer for example. In our model, takeovers both increase the surplus from trade and enable the firm to extract a potentially higher share of the surplus from the buyer. The possibility of a takeover that leaves the buyer with a higher (lower) rent than the incumbent manager increases (decreases) the buyer's willingness to reveal their valuation. We suggest a number of testable predictions on the performance of takeover targets and trade credit.

Suggested Citation

  • Chemla, Gilles, 2003. "Takeovers and the Dynamics of Information Flows," CEPR Discussion Papers 4051, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:4051
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    More about this item

    Keywords

    Takeovers; Information; Disclosure; Buyer; Price; Value;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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