Takeover rumors: returns and pricing of rumored targets

Hsin-I Chou, Gloria Y. Tian, Xiangkang Yin

Research output: Contribution to journalArticlepeer-review

11 Citations (Scopus)
213 Downloads (Pure)

Abstract

Rumors can be classified into two types according to whether they can credibly predict impending events. An analysis of takeover rumors of publicly traded US companies shows that the types of rumors are statistically distinguishable by the returns of the rumored targets before the publications of respective rumors. However, market responses to rumors on the day of and the day after the rumor’s publication are statistically indifferent. Trading on takeover rumors can be profitable. Moreover, rumored targets display a different return pattern than other takeover targets, and their takeover premiums cannot be explained by the markup pricing or substitution hypothesis.
Original languageEnglish
Pages (from-to)13-27
Number of pages15
JournalInternational Review of Financial Analysis
Volume41
Early online date20 May 2015
DOIs
Publication statusPublished - 1 Oct 2015

Keywords

  • Takeover rumor, merger and acquisition, runup, markup, takeover premium

ASJC Scopus subject areas

  • Finance

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