The Empirical Evidence Strongly Indicates That the Stockholders of the Target

question 64

Essay

The empirical evidence strongly indicates that the stockholders of the target firm realize large wealth gains as a result of a takeover bid but the stockholders in the acquiring firm gain little,if anything. Although there exists no definitive answer as to why this is the case,several possible explanations have been proposed. List and explain three of these possible explanations for the minimal returns to the acquiring firm's stockholders.

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