If at first you dont succeed: An experimental investigation of the impact of repetition options on corporate takeovers and the provision of public goods

Gillette, Ann and Noe, Thomas (2006) If at first you dont succeed: An experimental investigation of the impact of repetition options on corporate takeovers and the provision of public goods. The Review of Financial Studies, 19 (2). pp. 561-603.

Abstract

This paper models, and experimentally simulates, the free-rider problem in a takeover when the raider has the option to “resolicit,” that is, to make a new offer after an offer has been rejected. In theory, the option to resolicit, by lowering offer credibility, increases the dissipative losses associated with free riding. In practice, the outcomes of our experiment, while quite closely tracking theory in the effective absence of an option to resolicit, differed dramatically from theory when a significant probability of resolicitation was introduced: The option to resolicit reduced the costs of free riding fairly substantially. Both the raider offers and the shareholder tendering responses generally exceeded equilibrium predictions.

Item Type: Article
Keywords: Corporate takeovers; Experimental economics; Resolicit; finance
Subject(s): Finance
Date Deposited: 26 Feb 2012 15:57
Last Modified: 27 Feb 2017 10:11
Funders: N/A
URI: http://eureka.sbs.ox.ac.uk/id/eprint/2635

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