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- Publisher Website: 10.1108/S0742-332220140000031002
- Scopus: eid_2-s2.0-84911415457
- WOS: WOS:000348442100004
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Book Chapter: Termination Payment Provisions in Acquisitions: An Information Economics Perspective
Title | Termination Payment Provisions in Acquisitions: An Information Economics Perspective |
---|---|
Authors | |
Keywords | Acquisition contracts Hold-up risk Information economics Mergers and acquisitions Termination provisions |
Issue Date | 2014 |
Publisher | Emerald Group Publishing Limited |
Citation | Termination Payment Provisions in Acquisitions: An Information Economics Perspective. In Villalonga, B (Ed.), Finance and Strategy, p. 69-102. Emerald Group Publishing Limited, 2014 How to Cite? |
Abstract | In M&A markets, acquirers face a hold-up problem of losing the value of investments they make in due diligence, negotiations, and post-acquisition planning if targets would pursue the options of waiting for better offers or selling to an alternative bidder. This chapter extends information economics to the literature on M&A contracting by arguing that such contracting problems are more likely to occur for targets with better outside options created by the information available on their resources and prospects. We also argue that acquirers address these contracting problems by using termination payment provisions to safeguard their investments. While previous research in corporate strategy and finance has suggested that certain factors can facilitate an acquisition by reducing a focal acquirer’s risk of adverse selection (e.g., signals, certifications), we note that these same factors can make the target attractive to other potential bidders and can exacerbate the risk of hold-up, thereby leading acquirers to use termination payment provisions as contractual safeguards. |
Persistent Identifier | http://hdl.handle.net/10722/201998 |
ISBN | |
ISSN | 2021 Impact Factor: 0.275 2020 SCImago Journal Rankings: 1.571 |
ISI Accession Number ID | |
Series/Report no. | Advances in Strategic Management, vol. 31 |
DC Field | Value | Language |
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dc.contributor.author | Wu, C | en_US |
dc.contributor.author | Reuer, J | en_US |
dc.date.accessioned | 2014-08-21T07:55:59Z | - |
dc.date.available | 2014-08-21T07:55:59Z | - |
dc.date.issued | 2014 | en_US |
dc.identifier.citation | Termination Payment Provisions in Acquisitions: An Information Economics Perspective. In Villalonga, B (Ed.), Finance and Strategy, p. 69-102. Emerald Group Publishing Limited, 2014 | en_US |
dc.identifier.isbn | 9781783504930 | en_US |
dc.identifier.issn | 0742-3322 | - |
dc.identifier.uri | http://hdl.handle.net/10722/201998 | - |
dc.description.abstract | In M&A markets, acquirers face a hold-up problem of losing the value of investments they make in due diligence, negotiations, and post-acquisition planning if targets would pursue the options of waiting for better offers or selling to an alternative bidder. This chapter extends information economics to the literature on M&A contracting by arguing that such contracting problems are more likely to occur for targets with better outside options created by the information available on their resources and prospects. We also argue that acquirers address these contracting problems by using termination payment provisions to safeguard their investments. While previous research in corporate strategy and finance has suggested that certain factors can facilitate an acquisition by reducing a focal acquirer’s risk of adverse selection (e.g., signals, certifications), we note that these same factors can make the target attractive to other potential bidders and can exacerbate the risk of hold-up, thereby leading acquirers to use termination payment provisions as contractual safeguards. | en_US |
dc.language | eng | en_US |
dc.publisher | Emerald Group Publishing Limited | en_US |
dc.relation.ispartof | Finance and Strategy | en_US |
dc.relation.ispartofseries | Advances in Strategic Management, vol. 31 | - |
dc.subject | Acquisition contracts | - |
dc.subject | Hold-up risk | - |
dc.subject | Information economics | - |
dc.subject | Mergers and acquisitions | - |
dc.subject | Termination provisions | - |
dc.title | Termination Payment Provisions in Acquisitions: An Information Economics Perspective | en_US |
dc.type | Book_Chapter | en_US |
dc.identifier.email | Wu, C: chweiwu@hku.hk | en_US |
dc.identifier.authority | Wu, C=rp01631 | en_US |
dc.identifier.doi | 10.1108/S0742-332220140000031002 | - |
dc.identifier.scopus | eid_2-s2.0-84911415457 | - |
dc.identifier.hkuros | 233483 | en_US |
dc.identifier.spage | 69 | en_US |
dc.identifier.epage | 102 | en_US |
dc.identifier.isi | WOS:000348442100004 | - |
dc.identifier.issnl | 0742-3322 | - |