This paper develops an auction design framework to analyze various methods for assessing “fair value” in post-merger appraisal proceedings. Our inquiry spotlights an approach recently embraced by some courts benchmarking fair value against the merger price itself. We show that merger price...

This paper studies manipulation in cash-settled derivative contract markets. When traders hedge factor risk using cash-settled derivatives, which are settled based on the price of a spot good, traders can manipulate settlement prices by trading the spot good. In equilibrium, manipulation can...

We consider takeover bidding in a Cournot oligopoly when firms have private information concerning the synergy effect of merging with a takeover target. Two auction rules are considered: standard first-price and profit-share auctions, supplemented by entry fees. Since non-merged firms benefit...

As a subcategory of contract negotiations, corporate transactions present information problems that have not been fully analyzed. In particular, the literature does not address the possibility that parties may simply be unaware of value-increasing transaction terms or their outside option. Such...

While acquisitions are a popular form of investment, the link between firms' financial constraints and acquisition policies is not well-understood. We develop a model in which financially-constrained bidders decide when to approach the target, how much to bid, and whether to bid in cash or...

This paper analyses the efficiency of the Texas shootout and ½-auction partnership dissolution mechanisms when one of the partners has a chance to observe the other partner's valuation. The efficiency of the Texas shootout mechanism positively depends on the probability of such observation...

We study how common ownership among potential acquirers influences the firm selling process. We find that, when potential acquirers share a common owner, the target firm is more likely to be sold through auction rather than negotiation with a single acquirer. The presence of common owner does...

This paper proposes and tests an explanation as to why rational managers seeking to maximize shareholder value can pursue value-decreasing mergers. It can be optimal to overpay for a target firm and decrease shareholder value if the loss is less than in an alternative where the merger is...