Hostility in Takeovers: In the Eyes of the Beholder?


  • G. William Schwert

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    • Distinguished University Professor of Finance and Statistics, William E. Simon Graduate School of Business Administration, University of Rochester and Research Associate, National Bureau of Economic Research. I am indebted to Bob Comment for many discussions on this topic and for the use of his database. Comments from seminar participants at Columbia, Emory, Harvard, NYU, Yale, and the NBER Corporate Finance Conference are gratefully acknowledged. I also benefited from the suggestions of David Blackwell, Jarrad Harford, Paul Healy, Randall Mørck, René Stulz, Jerold Zimmerman, and an anonymous referee. The views expressed here are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research. The Bradley Policy Research Center at the Simon School provided support for this research.


This paper examines whether hostile takeovers can be distinguished from friendly takeovers, empirically, based on accounting and stock performance data. Much has been made of this distinction in both the popular and the academic literature, where gains from hostile takeovers result from replacing incumbent managers and gains from friendly takeovers result from strategic synergies. Alternatively, hostility could reflect strategic choices made by the bidder or the target. Empirical tests show that most deals described as hostile in the press are not distinguishable from friendly deals in economic terms, except that hostile transactions involve publicity as part of the bargaining process.