In this paper, we develop and test five hypotheses relating the takeover premium paid for a target to the investors' divergence of opinion on the target's equity value. For a sample of acquisitions of publicly traded targets, we show that the total takeover premium is higher when investors have...

This paper studies the effect of advertising on stock returns both in the short run and in the long run. We find that a greater amount of advertising is associated with a larger stock return in the advertising year but a smaller stock return in the year subsequent to the advertising year, even...

Most finance theories suggest that debt and leases are substitutes. However, the empirical findings on the substitutability between leases and debt are mixed. This paper empirically re-investigates this relationship, and differs from the previous literature in three aspects. First we construct a...

This paper provides the first theoretical explanation and the first empirical analysis of contingent value rights (CVRs), which have been used as a means of payment in acquisitions, exchange offers, debt restructurings, Chapter 11 reorganizations, and lawsuit settlements. A CVR is a put option...

We test several hypotheses on how takeover premium is related to investors' divergence of opinion on a target's equity value. We show that the total takeover premium, the pre-announcement target stock price run-up, and the post-announcement stock price markup are all higher when investors have...

Several recent papers have documented the benefits of Debtor-in-possession (DIP) financing in the restructuring of firms in Chapter 11. However, the view on benefits is not unanimous and some legal scholars have raised doubts about DIP financing's effects on debt-holders and the possibility of...

This study empirically examines tender and exchange offers for a recent sample of 46 high-yield debt restructurings by financially distressed firms during 1989-1992. We find significant differences between tender and exchange offers. Firms using tender offers appear to be in less financial...