Effective Post-Signing Market Check or Window Dressing? The Role of Go-Shop Provisions in M&A Transactions


  • Jin Q Jeon,

  • Cheolwoo Lee

    Corresponding author
    • Address for correspondence: Cheolwoo Lee, Accountancy, Finance, & Info Systems Department, College of Business, Ferris State University, 119 South Street, BUS 366, Big Rapids, MI 49307, USA. e-mail: cheolwoolee@ferris.edu

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    • The first author is from Dongguk Business School, Dongguk University, 3–26 Pil-dong, Chung-gu, Seoul, 100–715, South Korea. The second author is from School of Business, Ferris State University, Big Rapids, MI, 49307, USA. The authors thank Paul André (associate Editor), an anonymous referee, Tony Via, and seminar participants in 2011 Asia Finance Association (Asia FA) meetings and 2013 Eastern Finance Association (EFA) meetings for valuable comments. Jin Q. Jeon acknowledges the financial support of the Dongguk University Research Fund. Any remaining errors are the authors’ responsibility.


This paper examines the use of go-shop provisions in M&A. We find that go-shop deals tend to have higher deal premiums and receive more competing bids while the length of the go-shop period does not affect deal premium and competition. Also, deals are less likely to be completed when a go-shop provision is included and when the go-shop length is longer. However, go-shops have no effect on the completion of high premium deals. We also find that the presence of a go-shop provision leads to a positive market reaction to deal announcements. Overall, our findings support the proposition that go-shops reflect the efforts of target managers to fulfill the Revlon duties in the form of a post-signing market check, which is consistent with stewardship theory.