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Predicting the Outcome of Tender Offers An Endogeneity Problem

Predicting the Outcome of Tender Offers An Endogeneity Problem This paper proposes an alternative method of estimating a model that predicts the outcome of a tender offer. We argue that previous econometric models designed to predict the outcome of a tender offer have been estimated incorrectly. Explanatory variables which are endogenous have been treated as though they were exogenous. Ignoring the endogeneity problem results in estimates of regression coefficients which are inconsistent. In order to derive consistent estimates of the regression coefficients, we construct a simultaneous equation model to explain the outcome of a tender offer. Since two of the three dependent variables in the simultaneous equation model are dichotomous, it is necessary to use the two stage limited dependent variable estimator 2SLDV to find consistent estimates of the regression coefficients. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Managerial Finance Emerald Publishing

Predicting the Outcome of Tender Offers An Endogeneity Problem

Managerial Finance , Volume 17 (6): 6 – Jun 1, 1991

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
0307-4358
DOI
10.1108/eb013687
Publisher site
See Article on Publisher Site

Abstract

This paper proposes an alternative method of estimating a model that predicts the outcome of a tender offer. We argue that previous econometric models designed to predict the outcome of a tender offer have been estimated incorrectly. Explanatory variables which are endogenous have been treated as though they were exogenous. Ignoring the endogeneity problem results in estimates of regression coefficients which are inconsistent. In order to derive consistent estimates of the regression coefficients, we construct a simultaneous equation model to explain the outcome of a tender offer. Since two of the three dependent variables in the simultaneous equation model are dichotomous, it is necessary to use the two stage limited dependent variable estimator 2SLDV to find consistent estimates of the regression coefficients.

Journal

Managerial FinanceEmerald Publishing

Published: Jun 1, 1991

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