Abstract
We employ a sample of 201 freeze-out tender offers (offers of controlling shareholders to buy all public shares) in Israel to examine how investors’ decision (to accept or reject the offer) is influenced by alternative reference prices, some of which are commonly specified in freeze-out offers. Our findings reveal that average purchase price is the key reservation price – when freeze-out offer price exceeds our novel estimate of the minority shareholders’ average purchase price of the shares, offer acceptance probability increases significantly. Thus, purchase price appears as a more fundamental behavioral anchor than its main competitor – the past 52-weeks high.
| Original language | English |
|---|---|
| Article number | 101160 |
| Journal | Journal of International Financial Markets, Institutions and Money |
| Volume | 64 |
| DOIs | |
| State | Published - Jan 2020 |
Bibliographical note
Publisher Copyright:© 2019 Elsevier B.V.
Funding
We are grateful to Yakov Amihud, Yaniv Grinstein, Eugene Kandel, Oded Palmon, Orly Sade, Yishay Yafeh, Eyal Winter, and the journal referees and responsible Editor (Chris Veld) for their constructive comments. We have benefitted from presentations at the 2nd Tel Aviv Behavioral Finance Conference, and seminars at Bar Ilan University, and the University of Vienna. We also thank Ori Kaz, and Tomer Yafeh for their outstanding research assistance. This project received partial financial support from the Ackerman Family Chair in Israeli Corporate Governance.
| Funders | Funder number |
|---|---|
| Universität Wien |
Keywords
- Freeze-out transactions
- Loss aversion
- Reference points