What is the Price of Hubris? Using Takeover Battles to Infer Overpayments and Synergies

Published

Journal Article

We present a framework for determining the information that can be extracted from stock prices around takeover contests. In only two types of cases is it theoretically possible to use stock price movements to infer bidder overpayment and relative synergies. Even in these two cases, we argue that it is practically difficult to extract this information. We illustrate one of these generic cases using the takeover contest for Paramount in 1994 in which Viacom overpaid by more than $2 billion. Our findings are consistent with managerial overconfidence and/or large private benefits, but not with the traditional agency-based incentive problem.

Full Text

Duke Authors

Cited Authors

  • Hietala, P; Kaplan, SN; Robinson, DT

Published Date

  • January 1, 2003

Published In

Volume / Issue

  • 32 / 3

Start / End Page

  • 5 - 31

International Standard Serial Number (ISSN)

  • 0046-3892

Digital Object Identifier (DOI)

  • 10.2307/3666381

Citation Source

  • Scopus