TAKEOVER RESISTANCE, INFORMATION LEAKAGE, AND TARGET FIRM VALUE

This study examines the effect of management responses to takeovers on the value of the target firm. Three categories of takeover responses are identified; auction-inducing resistance, competition-reducing resistance, and support. Auction-inducing resistance is shown to increase competition for control of the target firm. This increased competition leads to increased gains to the target firm during the takeover battle relative to gains obtained when the initial takeover offer is supported. Competition-reducing resistance is shown to have the opposite effect.