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Discussion Paper Details

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Title: Takeovers and the Dynamics of Information Flows

Author(s): Gilles Chemla

Publication Date: September 2003

Keyword(s): buyer, disclosure, information, price, takeovers and value

Programme Area(s): Financial Economics and Industrial Organization

Abstract: This Paper analyses the effect of a possible takeover on information flows and on the terms of trade in business relationships. We consider a long-term relationship between a firm and a privately-informed stakeholder, a buyer for example. In our model, takeovers both increase the surplus from trade and enable the firm to extract a potentially higher share of the surplus from the buyer. The possibility of a takeover that leaves the buyer with a higher (lower) rent than the incumbent manager increases (decreases) the buyer's willingness to reveal their valuation. We suggest a number of testable predictions on the performance of takeover targets and trade credit.

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Bibliographic Reference

Chemla, G. 2003. 'Takeovers and the Dynamics of Information Flows'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=4051