Are Bidder-Initiated Takeovers Opportunistic?
About this event
Hosted by
Speaker
Professor Bjorn Espen Eckbo, Tuck Centennial Professor of Finance.
Professor Eckbo is the Tuck Centennial Professor of Finance at Tuck School of Business at Dartmouth College, USA. Before joining the Tuck faculty in 1998, he was a faculty member at:
- the University of British Columbia (1981–1996)
- the Stockholm School of Economics (1996–98)
He studies corporate finance, with a particular emphasis on:
- transactions in the market for corporate control (M&As and corporate restructurings)
- how firms raise capital to fund investments
- capital structure choice
- issues in international corporate governance
Professor Eckbo currently serves as a research associate of the European Corporate Governance Institute. He served as founding director of Tuck’s Lindenauer Center for Corporate Governance from 1999 through 2020.
He teaches MBA electives in corporate finance and corporate takeovers at Tuck. He also teaches a PhD course on corporate finance at the Norwegian School of Economics, where he was awarded an honorary doctorate in 2011.
He received the prestigious Batterymarch Fellowship in 1987. He has also received numerous awards for his research publications.
Woxsen University (Hyderabad, India) honoured him by establishing the Bjorn Espen Eckbo Professorship in Corporate Finance in 2022.
ScholarGPS recently ranked Professor Eckbo among the top 15 researchers in the world that contribute to the broad area of Corporate Finance. This is based on citations and research impact.
Abstract
By self-selecting the time to initiate the takeover process, an acquirer increases its chance of paying for the target with overpriced shares, possibly outbidding more efficient buyers.
We present a first test of this opportunistic market-timing hypothesis that requires the bidder— not the target—to initiate the deal process. Our alternative hypothesis is that bidders pay with shares for efficiency reasons driven by target adverse selection and bidder cash constraints, which does not depend on who initiates the deal. Reduced form tests, structural model simulations, and estimated wealth effects all fail to support opportunistic market timing in bidder-initiated takeovers.