The Empirical Evidence Strongly Indicates That the Equityholders of the Target

question 14

Essay

The empirical evidence strongly indicates that the equityholders of the target firm realize large wealth gains as a result of a takeover bid but the equityholders 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 equityholders.

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Definitions:

Impulsive Actions

Behaviors that are performed quickly without careful thought or planning, often as a result of spontaneous desires or emotions.

Development of the Ego

The process through which an individual's sense of self or identity emerges and evolves, influenced by psychological, social, and biological factors.

Experience Shame

An intense emotional response felt when an individual perceives themselves as having failed to meet certain standards or expectations, which can be internal or societal.

Experience Guilt

The emotional state that arises from the realization or belief that one has caused harm or violated a moral standard.