The Characteristics of Successful Bidders



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IFA Working Paper

Authors / Editors

Servaes H


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This paper examines the characteristics of firms that complete acquisitions over the period 1972-1993. Successful acquirors tend to be larger, they have poor investment opportunities, high cash balances and high levels of free cash flow when compared to a sample of control firms. They also have higher leverage and asset growth rates than control firms. Insider ownership has a negative impact on the probability of becoming a bidder for low levels of insider ownership, but a positive impact for high levels of insider ownership. The results are stronger for acquisitions completed during the 1980s and 1990s and for acquisitions where cash is used as the form of payment. These findings are broadly consistent with arguments advanced by Jensen (1986), Roll (1986), Myers and Majluf (1984), and Stulz (1988).


IFA Working Paper