Department of Finance, School of Management, Boston College. This paper builds on Chapters 4 and 5 of the author's Ph.D. thesis at the Graduate School of Business Administration, New York University (1984). He is very grateful to the members of his dissertation committee—Michael Keenan (Chairman), Ernest Bloch, Joel Owen, and Anthony Saunders—for their unlimited support and valuable suggestions. The helpful comments of Yakov Amihud, Thomas Downs, Michael Fishman, Theoharry Grammatikos, Avner Kalay, Uri Loewenstein, Marcia Millon, Nikolaos Milonas, George Papaioannou, Hassan Tehranian, Jerry Viscione, James Waegelein, and an anonymous associate editor (the referee) of this Journal are gratefully acknowledged. The research assistance of Douglas Bulfinch and Michael Malone is greatly appreciated. The author also acknowledges the financial support from the Boston College Research Council.
Corporate Takeover Bids, Methods of Payment, and Bidding Firms' Stock Returns
Article first published online: 30 APR 2012
1987 The American Finance Association
The Journal of Finance
Volume 42, Issue 4, pages 943–963, September 1987
How to Cite
TRAVLOS, N. G. (1987), Corporate Takeover Bids, Methods of Payment, and Bidding Firms' Stock Returns. The Journal of Finance, 42: 943–963. doi: 10.1111/j.1540-6261.1987.tb03921.x
- Issue published online: 30 APR 2012
- Article first published online: 30 APR 2012
This study explores the role of the method of payment in explaining common stock returns of bidding firms at the announcement of takeover bids. The results reveal significant differences in the abnormal returns between common stock exchanges and cash offers. The results are independent of the type of takeover bid, i.e., merger or tender offer, and of bid outcomes. These findings, supported by analysis of nonconvertible bonds, are attributed mainly to signalling effects and imply that the inconclusive evidence of earlier studies on takeovers may be due to their failure to control for the method of payment.