Reference prices and withdrawn acquisitions
Using a sample of 1525 withdrawn deals from 1981 to 2015 in the United States, we find that target firms close to their 52-week high prices after merger announcements have lower withdrawal probabilities. The effect is different across merger waves. The out-wave deals are sensitive to the target reference prices while in-wave deals are not. Moreover, targets with post-announcement prices close to 52-week high tend to have higher withdrawn returns and receive higher adjustments of offering prices in renegotiation. Overall, our results suggest that target post-announcement stock prices significantly affect deal outcomes.
International Journal of Finance and Economics
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Lai, Shaojie; Pu, Xiaoling; Wang, Qing; and Zhang, Jianing, "Reference prices and withdrawn acquisitions" (2023). Kean Publications. 56.