Wealth Reduction in White Knight Bids

Abstract

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.

Multiple bids as a consequence of target management resistance: A count data approach

“…Clearly the entry of a friendly bidder facilitates the auction process and benefits target stockholders. This finding also complements the recent results reported by Banerjee and Owers (1992), who show that white knight bidders on average experience negative returns. While a takeover contest is generally not a zero-sum game, we infer that a white knight strategy by target management is successful in bidding up the offer price.…”

“…White Knight takes value 1 if target management invites a friendly third party to enter the bidding; 0 otherwise? Our defmition of a white knight resembles that followed by Banerjee and Owers (1992). This type of management action differs substantially from the type of actions discussed above.…”

Mergers increase default risk

“…However, because targets generally sell at a significant premium, this runs the risk of making RATIO systematically larger for mergers where the target is publicly traded. 24 Studies that find negative average returns to acquiring firms include Asquith et al (1987), Banerjee and Owers (1992), Bradley et al (1988), Byrd and Hickman (1992), Jennings and Mazzeo (1991), Servaes (1991), Varaiya and Ferris (1987), and You et al (1986). See Table 8-6 in Gilson and Black (1995).…”

CEO Turnover after Acquisitions: Do Bad Bidders get Fired?

“…Several forces are believed to mitigate conflicts between managers and shareholders, including competitive labor and product markets, managerial compensation plans, the structure 1 Asquith et al (1987), Banerjee and Owers (1992), Bradley et al (1988), Byrd and Hickman (1993), Jennings and Mazzeo (1991), Servaes (1991), Varaiya and Ferris (1987), Gilson and Black (1995), Rau and Vermaelen (1998), Duggal and Millar (1999), Becher (2000), Ghosh (2001). for Ouaker's shareholders.…”