Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212075 
Year of Publication: 
2007
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 17/2007
Publisher: 
Bank of Finland, Helsinki
Abstract: 
This paper proposes and tests an explanation as to why rational managers seeking to maximize shareholder value can pursue value-decreasing mergers. It can be optimal to overpay for a target firm and decrease shareholder value if the loss is less than in an alternative where the merger is undertaken by a product market rival. This paper presents a model based on synergies, market power and competition for merger targets. Consistent with the model the empirical results obtained here show a strong correlation between the returns of acquiring firms and close rivals around merger events.
Subjects: 
acquisitions
auction
event study
oligopoly
preemption
JEL: 
G34
G14
D43
D44
L13
Persistent Identifier of the first edition: 
ISBN: 
978-952-462-383-4
Document Type: 
Working Paper

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