Signaling and Takeover Deterrence with Stock Repurchases: Dutch Auctions versus Fixed Price Tender Offers

Signaling and Takeover Deterrence with Stock Repurchases: Dutch Auctions versus Fixed Price... ABSTRACT This article presents a model of repurchase tender offers in which firms choose between the Dutch auction method and the fixed price method. Dutch auction repurchases are more effective takeover deterrents, while fixed price repurchases are more effective signals of undervaluation. The model yields empirical implications regarding price effects of repurchases, likelihood of takeover, managerial compensation, and cross‐sectional differences in the elasticity of the supply curve for shares. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Finance Wiley

Signaling and Takeover Deterrence with Stock Repurchases: Dutch Auctions versus Fixed Price Tender Offers

The Journal of Finance, Volume 49 (4) – Sep 1, 1994

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Publisher
Wiley
Copyright
1994 The American Finance Association
ISSN
0022-1082
eISSN
1540-6261
DOI
10.1111/j.1540-6261.1994.tb02458.x
Publisher site
See Article on Publisher Site

Abstract

ABSTRACT This article presents a model of repurchase tender offers in which firms choose between the Dutch auction method and the fixed price method. Dutch auction repurchases are more effective takeover deterrents, while fixed price repurchases are more effective signals of undervaluation. The model yields empirical implications regarding price effects of repurchases, likelihood of takeover, managerial compensation, and cross‐sectional differences in the elasticity of the supply curve for shares.

Journal

The Journal of FinanceWiley

Published: Sep 1, 1994

References

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