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Merger Failure and Merger Profitability

Morten Hviid and Canice Prendergast
The Journal of Industrial Economics
Vol. 41, No. 4 (Dec., 1993), pp. 371-386
Published by: Wiley
DOI: 10.2307/2950598
Stable URL: http://www.jstor.org/stable/2950598
Page Count: 16
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Merger Failure and Merger Profitability
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Abstract

The focus of the paper is the effect of merger proposals on the expected profitability of the bidder and the target. We illustrate how an unsuccessful bid may increase the profitability of the target but reduce the profitability of the bidding firm, relative to the profitability of the firms before the merger offer. The profitability of a merger proposal is lowered due to learning from rejection. We use our theoretical model to explain empirical work on this issue.

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