A significant portion of firms' capital expenditures in the recent past have been accomplished through the acquisition of the assets of other firms by tender offers. While the majority of tender offers are successful, a significant number of tender offers fail for various reasons. The accurate prediction of the success or failure of a tender offer would provide investors with valuable information upon which to base their investment decisions. The target firm shareholders could use the information as a base for their tendering decision. For the abitrageur, a predictive model would reduce the uncertainty associated with their investment activity and, thereby, increase their expected return.
This study derives and tests an efficient market theory-based hypothesis for the prediction of inter-firm cash tender offer outcomes. This new hypothesis incorporates salient features from the Efficient Markets Theory, Contingent Claims Theory/Option Price Modeling, Capital Asset Pricing Theory and Event Study Methodology. The tender offer outcome prediction model is tested against a broadbased sample of tender offers to determine the formulation's accuracy and robustness. The study results are assessed in terms of how well the model predicts cash tender outcomes and whether or not market participants are rational and efficient in assessing the wealth-related consequences of investing in the securities of firms which are the target of tender offers.
Doctor of Philosophy (Ph.D.)
College of Business Administration
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Length of Campus-only Access
Doctoral Dissertation (Open Access)
Business Administration -- Dissertations, Academic; Dissertations, Academic -- Business Administration
Montgomery, James I., "Tender offer outcome prediction based upon efficient market hypothesis" (1995). Retrospective Theses and Dissertations. 3278.