Fridolfsson, Sven-Olof; Stennek, Johan - In: Journal of the European Economic Association 3 (2005) 5, pp. 1083-1104
We provide a possible explanation for the empirical puzzle that mergers often reduce profits, but raise share prices. If being an "insider" is better than being an "outsider", firms may merge to preempt their partner merging with a rival. The insiders' stock market value is increased, since the...