Takeovers of Privately Held Targets, Methods of Payment, and Bidder Returns


  • Saeyoung Chang

    1. Department of Finance, University of Hawaii
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    • * Department of Finance, University of Hawaii. I thank Steve Dawson, Raghavendra Rau, René Stulz (the editor), an anonymous referee, and seminar participants at the University of Hawaii and the 1996 Financial Management Association meeting for helpful comments. I also thank David Mayers for helpful discussions and Beth Baugh for editorial assistance.


We examine bidder returns at the announcement of a takeover proposal when the target firm is privately held. In stock offers, bidders experience a positive abnormal return, which contrasts with the negative abnormal return typically found for bidders acquiring a publicly traded target. On the other hand, bidders experience no abnormal return in cash offers. Our analysis suggests that the positive wealth effect is related to monitoring activities by target shareholders and, to an extent, reduced information asymmetries.