Journal of Economics and Finance

, Volume 20, Issue 3, pp 39–47 | Cite as

Determinants of bidder competition in corporate takeovers

  • Gregory M. Noronha
  • Nilanjan Sen
  • David M. Smith


The importance of bidder competition in the corporate takeover process has long been recognized in theoretical models. This paper provides empirical tests of those models. The results indicate that resistance by target management to an initial bid encourages multiple bidders. Competing bidders are less likely to enter in cases where the target is large, but more likely to arise when the initial bidder is highly levered. High initial bids (preemptive bids) are found to discourage entry by additional firms. Surprisingly, targets with high levels of free cash flow tend not to be the recipients of multiple bids.


Abnormal Return Free Cash Flow Cumulative Abnormal Return Target Firm Tender Offer 
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Copyright information

© Springer 1997

Authors and Affiliations

  • Gregory M. Noronha
    • 1
  • Nilanjan Sen
    • 1
  • David M. Smith
    • 2
  1. 1.Department of FinanceArizona State UniversityPhoenix
  2. 2.Department of FinanceUniversity of Albany, SUNYAlbany

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