Bidders’ Strategic Timing of Acquisition
Announcements and the Effects of Payment
Method on Target Returns and Competing Bids
Sheng-Syan Chena, Robin K. Choub and Yun-Chi Leec
aNational Taiwan University
bNational Chengchi University
cNational Central University
I. Introduction


In M&A, the method of payment has an information signaling effect
Stock returns accrued to target firms are significantly higher in cash
payment acquisitions than in stock or mixed payment acquisitions


Huang and Walkling, 1987; Servaes, 1991; Schwert, 1996; Heron and Lie, 2002
High initial acquisition premium signals a high bidder valuation


Cash payments are used to signal a higher valuation of the target firm so as to preempt
any potential competing bidder.
Giammarino and Heinkel (1986), Fishman (1988 and 1989), and Hirshleifer and Png
(1989)
2
I. Introduction

Cash payment transactions are associated with higher acquisition premiums
and target shareholders earn higher returns when the acquisition is financed
with cash.


Cotter and Zenner, 1994; Officer, 2003 and 2006
Cash payment offers may be more effective in deterring competition.


Fishman (1989)
Mixed evidence: Martin (1996) documents that cash payments preempt competing bids,
but Jennings and Mazzeo (1993), Officer (2003), and Bange and Mazzeo (2004) do not
find supporting evidence.
3
I. Introduction




Existing studies do not distinguish between the announcements of
acquisitions made during overnight (nontrading) and daytime (trading)
hours.
Prior literature suggests that it is important to separate these two different
types of acquisition announcements.
Patell and Wolfson (1982), Woodruff and Senchack (1988), and Gennotte
and Trueman (1996) document that managers strategically choose their
announcement timing when disclosing corporate news.
Announcement timing may affect the degree of information dissemination
preceding the first trade in the post-announcement period.
4
I. Introduction

If the news is announced during the market close, the nontrading period
allows the information to be fully transmitted to all market participants.


Both investors and market makers thus have more time to evaluate the news.
The trading procedures during the market opening differ from those
employed during normal trading hours.

The opening mechanism ensures that much of the nontrading hour information is
impounded into the prices (Greene and Watts, 1996; Cao, Ghysels, and Hatheway, 2000;
Masulis and Shivakumar, 2002).
5
I. Introduction



Market reaction is greater for announcements made during nontrading
(Greene and Watts, 1996; Masulis and Shivakumar , 2002).
Their findings indicate that nontrading-hours announcements tend to have
more information content than trading-hours announcements.
We argue that bidder managers’ strategic timing of acquisition
announcements is important in assessing the effects of payment method on
signaling target valuation and deterring competing bids.
6
II. Hypothesis Development
A. The information effect of payment method during different announcement
times

Bidders may choose to release their acquisition announcements during the
market close to achieve the widest possible information dissemination.

They would choose to release their cash-financed acquisition with high
premiums during nontrading periods.


Result in higher stock returns to target shareholders than stock or mixed payment offers.
The timing strategy of a bidder is likely to maximize the signaling effect of
the method of payment and to create a unanimous market perception of the
bidder’s valuation of the target.

Market participants have more time to obtain, analyze, and evaluate the new information
arising from overnight announcements.
II. Hypothesis Development



If a bidder decides to make an announcement during normal trading hours,
the information asymmetry that exists between informed traders and other
market participants cannot be reduced (Francis, Pagach, and Stephan,
1992).
Chaotic traders tend to immediately react to daytime disclosures, thereby
creating excessive noise during trading hours.
The information signaling effect of the payment method will thus be
weakened, resulting in greater uncertainty with regard to the market
perception of the bidder’s valuation of the target and his/her determination
to acquire it.
8
II. Hypothesis Development
B. Preemptive bidding during different announcement times

Cash payment offers tend to lower the likelihood of competition than other
offers when the announcements are made during nontrading periods.


Competing bids are negatively related to the probability of bid success
(Officer, 2003; Bange and Mazzeo, 2004; Hsieh and Walkling, 2005),


Due to higher premiums
A greater likelihood of completing proposed acquisitions for those overnight
announcements that involve all cash payment.
In contrast, the positive effects of the payment method, in terms of
deterring potential bidders and completing proposed transactions, are less
likely when the announcements are made during normal trading hours.
9
III. Data and Methodology
A. Data and sample description

SDC Worldwide Mergers and Acquisitions database from 1995 to 2004.



NYSE, Amex, and Nasdaq.
The specific timing of the public announcement is identified by searching
the Dow Jones News Retrieval Service (DJNRS) database.
Intraday trade and quote data from the Trade and Quote (TAQ) database

Examine the real-time market reaction to acquisition events in the two-hour trading
period immediately surrounding the announcements.
10
III. Data and Methodology





1,230 acquisition announcements.
The NYSE, Amex, and Nasdaq are open for trading from 9:30 a.m. to 4:00
p.m. EST.
If an acquisition is announced outside this trading period or during holiday
periods, this is defined as a nontrading-hours announcement
An announcement made during 9:30 a.m. to 4:00 p.m. is referred to as a
trading-hours announcement.
Table 1 reports the sample distributions and summary statistics for the
1,230 initial acquisition announcements.
11
Table 1
Sample Distributions and Summary Statistics
Panel A: Sample Distribution by Announcement Timing and Payment Method
Payment Method
Announcement Timing
Cash
Stock
Mixed
Nontrading Hours
329
366
299
(26.75)
(29.76)
(24.31)
Percentage of Sample (%)
Trading Hours
Percentage of Sample (%)
Total
Percentage of Sample (%)
Total
994
(80.81)
86
88
62
236
(6.99)
(7.15)
(5.04)
(19.19)
415
454
361
1,230
(33.74)
(36.91)
(29.35)
(100.00)
Panel B: Descriptive Statistics of Other Bidder, Target, and Deal Characteristics
Subsample
Full
Sample
0.14
Nontrading-Hours
Announcements
0.15
Trading-Hours
Announcements
0.11
Difference
0.04*
Termination Fee
0.62
0.63
0.56
0.07*
Poison
0.01
0.01
0.01
-0.00
Hostile
0.06
0.05
0.08
-0.03
Toehold
0.05
0.05
0.08
-0.03
Financial Industry
0.28
0.29
0.25
0.05
Relatedness
0.65
0.64
0.67
-0.03
Relative Size
0.32
0.31
0.40
-0.10**
[0.14]
[0.12]
[0.18]
[-0.06]***
4.92
4.40
6.96
[1.90]
[1.82]
[2.22]
Variables
Tender Offer
Market-to-Book ratio
-2.56
[-0.40]***
Panel C: Sample Distribution by Year
Year
N
1995
8
1996
12
1997
17
1998
47
1999
162
2000
301
2001
230
2002
134
2003
162
2004
157
III. Data and Methodology
B. Methodology
B.1. Measurement of acquisition premiums

The acquisition premium employed in this study is defined as follows:
Acquisition Prem ium
Bid Price  Last Preacquisition Target Closing Price
Last Preacquisition Target Closing Price
13
III. Data and Methodology
B. Methodology
B.2. Measurement for the stock price impact of acquisition announcements

Follow Busse and Green (2002)

Calculate the percentage price change from the prevailing mid-quote data.
The real-time share price response to the target firm is measured by the
cumulative stock returns starting from one trading hour before to one
trading hour after the announcement.

For nontrading-hours announcements, the cumulative returns over a twohour trading window is adjusted for changes in the overall market.
14
III. Data and Methodology
C. Evidence on different information processes by announcement in days of the
week and by exchanges

As previously pointed out, a unanimous market perception of the bidder’s
valuation of the target is more likely to achieve, if the time of nontrading
periods is longer.

One way of testing this hypothesis is to examine the effects of
announcements on weekends versus on weekdays.


The signaling effect should be stronger for announcements made after market close on
weekends than on weekdays.
Moreover, it is interesting to see whether the effects of nontrading periods
are affected by trading mechanisms.
15
Table 2
Target Firm Stock Price Reaction to Acquisition Announcements by Day of the
Week and by Exchanges
Panel A: Target Firm Stock Price Reaction to Nontrading-Hours Acquisition Announcements
for Subsamples Grouped by Payment Method and Weekend vs. Weekday Announcements
Weekend
Weekday
Difference
A.1. Cash Payment
Mean (%)
27.61
21.63
5.98*
Median (%)
22.39
15.43
6.96**
N
85
244
A.2. Stock Payment
Mean (%)
11.45
12.04
-0.59
Median (%)
7.94
7.71
0.22
N
105
261
A.3. Mixed Payment
Mean (%)
16.27
14.07
2.20
Median (%)
13.41
11.20
2.22
N
94
205
Panel B: Target Firm Stock Price Reaction to Acquisition Announcements for Subsamples
Grouped by Exchanges and Announcement Timing
Nontrading-Hours
Trading-Hours
Difference
Announcements
Announcements
B.1. NYSE
Mean (%)
13.34
4.44
8.90***
Median (%)
9.53
0.56
8.97***
N
216
67
B.2. AMEX
Mean (%)
11.29
2.67
8.62***
Median (%)
8.61
0.50
8.12**
N
67
16
B.3. Nasdaq
Mean (%)
17.92
9.01
8.91***
Median (%)
12.87
3.27
9.59***
N
711
153
16


Panel A:
Nontrading-hours cash
offers made during
weekend have
significantly higher
mean and median
cumulative returns
than those made
during weekdays.
Panel B:
Nontrading-hours
announcements are
found to have
significantly higher
mean and median
cumulative returns
than trading-hours
announcements across
three exchanges.
IV. Evidence on the
Information Effect of
the Payment Method
for Different
Announcement Times
Table 3
Cross-Sectional Regression Analyses of Acquisition Premiums
Nontrading-Hours
Announcements
Variable
Model 1
Model 2
Model 1
Model 2
Intercept
0.2767
0.2721
0.2486
0.2358
(22.95)***
(8.91)***
(11.46)***
(4.64)***
0.0865
0.0635
0.0007
0.0015
(3.52)***
(2.35)**
Cash Payment
Tender Offer

(1.13)
0.0261
Poison
0.0307
(1.02)
(0.72)
-0.0836
-0.0146
(-1.11)
Hostile
(-0.07)
0.0059
-0.0077
(0.14)
Toehold
(-0.09)
-0.1336
-0.0553
(-2.81)***
Financial Industry
(-0.77)
-0.0383
-0.0598
(-1.57)
Relatedness
(-1.44)
0.0372
Relative Size
Market-to-Book Ratio
0.0426
(1.57)
(1.12)
-0.0360
-0.0741
(-1.99)**
(-2.33)**
-0.0010
0.0007
(-2.64)***
N
994
2
Adjusted R
F-Value
(0.04)
0.0666
(1.28)
A. Acquisition premiums
For overnight announcements,
the cash payment dummy are
positive and statistically
significant.
For daytime announcements, the
acquisition premiums are
insignificantly related to the cash
payment dummy.
(0.02)
0.0500
Termination Fee

Trading-Hours
Announcements
866
(0.98)
236
219
0.0132
0.0273
0.0043
0.0313
14.32***
3.43***
0.00
1.70*
Table 4
Cross-Sectional Regression Analyses of Target Firm Stock Price Reaction to
Acquisition Announcements
Variable
Intercept
Cash Payment
Nontrading-Hours
Announcements
Model 1
Model 2
0.1317
-0.0033
(18.61)***
(-0.14)
0.1000
(5.75)***
0.0763
(4.90)***
Trading-Hours
Announcements
Model 1
Model 2
0.0628
0.0148
(5.82)***
(0.58)
0.0276
(1.54)
0.0313
(1.62)
Acquisition Premium
0.3851
(6.22)***
0.1714
(5.22)***
Tender Offer
0.0246
(1.07)
0.0286
(1.02)
Termination Fee
0.0403
(2.79)***
0.0428
(2.13)**
Poison
-0.0180
(-0.45)
0.0023
(0.03)
Hostile
0.0071
(0.34)
0.0284
(0.74)
Toehold
-0.0234
(-0.80)
0.0151
(0.45)
Financial Industry
-0.0096
(-0.65)
0.0067
(0.34)
Relatedness
0.0153
(1.08)
-0.0331
(-1.83)*
Relative Size
-0.0177
(-1.85)*
-0.0149
(-0.97)
Market-to-Book Ratio
-0.0002
(-1.28)
-0.0001
(-0.35)
N
Adjusted R2
F-value
994
0.0417
44.20***
866
0.3591
45.06***
236
0.0058
2.38
219
0.1415
4.27***
B. Target firm stock price
reaction

The coefficients for the
cash payment dummy are
significantly positive at
the 1% level for overnight
announcements.

They are statistically
insignificant for daytime
announcements.
Table 5
Cross-Sectional Regression Analyses of Target Firm Stock Price Reaction to
Acquisition Announcements Net of Acquisition Premiums
Nontrading-Hours
Announcements
Trading-Hours
Announcements
Variable
Model 1
Model 2
Model 1
Model 2
Intercept
-0.1450
-0.1735
-0.1858
-0.1806
(-14.12)***
(-7.98)***
(-10.21)***
(-3.72)***
0.0298
0.0497
0.0269
0.0301
(1.67)*
(2.52)**
Cash Payment
Tender Offer
(0.74)
0.0049
-0.0266
(0.19)
Termination Fee
(-0.47)
0.0237
0.0174
(1.26)
Poison
(0.43)
0.0265
0.0145
(0.29)
Hostile
(0.08)
-0.0044
0.0348
(-0.11)
Toehold
(0.45)
0.0463
0.0609
(1.10)
Financial Industry
(0.89)
0.0133
Relatedness
0.0563
(0.69)
(1.42)
-0.0018
-0.0684
(-0.10)
Relative Size
(-1.89)*
0.0042
0.0465
(0.37)
Market-to-Book Ratio
(1.54)
0.0003
-0.0007
(0.74)
N
994
2
(0.77)
866
Adjusted R
0.0018
0.0010
F-value
2.79*
1.08
(-1.03)
236
-0.0016
0.62
219
0.0154
1.34
C. Target firm stock price
reaction net of acquisition
premiums

The effect of cash
payment offers is
correlated with the
acquisition premiums.

Overnight cash payment
offers still have a
marginal effect on the
target’s stock price
reaction after considering
the effect of acquisition
premiums on target
announcement returns.
IV. Evidence on the Information Effect of the Payment
Method for Different Announcement Times




The results from Tables 3 to 5 support our hypothesis.
For overnight acquisition announcements, cash payment offers are associated
with significantly higher acquisition premiums and target returns.
For daytime announcements, no significant differences in the acquisition
premiums and target returns are found between cash acquisitions and those
using other payment methods.
Even after considering the effect from acquisition premiums, cash payment
offers cause greater market reaction than other payment offers for
nontrading-hours announcements, but not for trading-hours announcements.
20
V. Evidence on Deterring Competition by Cash Payments
for Different Announcement Times
A. The relationship between the payment method and competition
Table 6
Frequency of Single and Multiple Bidders
Total
Single Bidders
Payment Method
N
N
%
Nontrading-Hours Announcements
Cash
329
321
97.57
Stock
366
348
95.08
Mixed
299
279
93.31
Subtotal
994
948
95.37
Trading-Hours Announcements
Cash
86
73
84.88
Stock
88
81
92.05
Mixed
62
53
85.48
Subtotal
236
207
87.71
Whole Sample
1,230
1,155
93.90


Multiple Bidders
N
%
8
18
20
46
2.43
4.92
6.69
4.63
13
7
9
29
75
15.12
7.95
14.52
12.29
6.10
Nontrading-hours: Cash(2.43%) v.s. Stock (4.92%), Diff=-2.49%, 10% significant
Cash(2.43%) v.s. Mixed (6.69%), Diff=-4.26%, 5% significant
Trading-hours: All differences are insignificant.
The frequency of multiple competitors is significantly lower for cash payment offers for
nontrading-hours announcements, this relationship does not hold for trading-hours
announcements.
21
Table 7
Logistic Regression Analyses of the Presence of Competing Bids
Nontrading-Hours
Announcements
Trading-Hours
Announcements
Variable
Model 1
Model 2
Model 1
Model 2
Intercept
-2.8034
-2.5446
-2.1252
-3.7757
(-16.78)***
(-5.42)***
(-8.03)***
(-3.79)***
-0.8886
-1.1559
0.3999
-0.1704
(-2.25)**
(-2.42)**

Cash Payment
Tender Offer
(1.00)
0.4951
Termination Fee
0.5696
(0.98)
(0.70)
-0.7254
-0.8078
(-1.89)*
Poison
(-0.28)
(-1.43)
-14.0302
-0.7678
(-0.03)
(-0.41)

Hostile
Toehold
Financial Industry
2.5069
3.6232
(5.36)***
(3.69)***
-13.0174
-12.6365
(-0.04)
(-0.03)
-1.1862
-0.0299
(-2.55)**
Relatedness
(-0.05)
0.6135
2.3548
(1.55)
Relative Size
(2.65)***
0.1973
-0.3370
(1.65)*
Market-to-Book Ratio
(-0.50)
-0.1166
0.0022
(-1.50)
N
Pseudo R
994
2
0.0160
866
0.2174
(0.29)
236
0.0056
219
0.2895
For overnight
announcements, the
coefficients on the
cash payment dummy
are negative and
statistically significant
at the 5% level.
For daytime
announcements, the
cash payment dummy
has no significant
influence on
competing bids.
Table 8
Logistic Regression Analyses of the Presence of Competing Bids for Subsamples
Grouped by Acquisition Premium Size and Payment Method
High Premiums
Low Premiums
Variable
Cash
Others
Cash
Others
Intercept
-3.1369
-3.2111
-2.6432
-2.0235
(-2.44)**
(-3.59)***
-1.3411
-0.8581
Overnight
(-1.65)*
Tender Offer
Termination Fee
Poison
Hostile
Toehold
Financial Industry
0.0347
(2.12)**
-1.5415
-0.1790
(-1.55)
(-0.29)
-11.0799
-15.2206
(-0.02)
(-0.01)
Market-to-Book Ratio
Pseudo R
-1.9571
(-1.21)
-1.0961
(-0.88)
-2.1701
(-0.77)
1.0120
(1.39)
-0.8525
(-1.86)*
-12.2604
(-0.01)
2.3289
(1.74)*
(3.87)***
(2.56)**
(3.61)***
-13.1961
-12.6020
-11.8323
-13.2902
(-0.05)
(-0.02)
(-0.05)
(-0.03)
-1.7727
2.1868
1.3729
-0.3391
(-0.55)
0.8594
(1.38)
0.5177
(1.13)
(1.47)
-0.1373
-0.0027
0.3864
(-0.21)
353
0.2326
-0.0068
(-0.01)
2.5983
(1.46)
-0.3850
(-0.26)
-0.4185
(-0.98)
160
0.4964

(-1.62)
4.7239
194
2
(-2.13)**
-0.7869
3.0407
(-0.69)
N
-2.1576
(-3.00)***
2.0796
(1.83)*
Relative Size
1.5026
(0.03)
(-1.38)
Relatedness
(-1.51)
(-1.39)
-0.8840
(-1.60)
0.7944
(1.49)
0.0669
(0.33)
-0.0030
(-0.21)
378
0.1748

Robustness checks:
Larger acquisition
premiums deter
competition, irrespective
announcement timing.
For cash payment offers,
overnight
announcements are
associated with
significantly lower
frequency of competition
in both high and low
premium subsamples.
V. Evidence on Deterring Competition by Cash Payments
for Different Announcement Times
B. The relationship between the method of payment and the success of the bid
Table 9
Frequency of Successful and Unsuccessful Acquisition Bids
Total
Successful Bids
Payment Method
N
N
%
Nontrading-Hours Announcements
Cash
329
289
87.84
Stock
366
302
82.51
Mixed
299
246
82.27
Subtotal
994
837
84.21
Trading-Hours Announcements
Cash
86
66
76.74
Stock
88
67
76.14
Mixed
62
51
82.26
Subtotal
236
184
77.97
Whole Sample
1,230
1,021
83.01


Unsuccessful Bids
N
%
40
64
53
157
12.16
17.49
17.73
15.79
20
21
11
52
209
23.26
23.86
17.74
22.03
16.99
Nontrading-hours: Cash(87.84%) v.s. Stock (82.51%), Diff=5.33%, 5% significant
Cash(87.84%) v.s. Mixed (82.27%), Diff=5.57%, 10% significant
Trading-hours: All differences are insignificant.
For overnight acquisition announcements, deals involving all cash payment are more likely to
be successful than deals involving other payment methods. However, this relationship does
not hold for daytime acquisition announcements.
24
Table 10
Logistic Regression Analyses of the Likelihood of Acquisition Bid Success
Nontrading-Hours
Announcements
Trading-Hours
Announcements
Variable
Model 1
Model 2
Model 1
Model 2
Intercept
1.5441
0.5552
1.3049
0.3120
(15.17)***
(2.24)**
(6.55)***
0.4331
0.7872
(2.20)**
(2.85)***
Cash Payment
Tender Offer
-0.1110
(-0.34)
0.5549
Poison
Financial Industry
1.4433
(6.88)***
(3.29)***
-12.6252
(-0.01)
-3.0514
-2.4591
(-6.33)***
(-2.88)***
1.8577
1.7039
(2.31)**
(1.97)**
0.7164
-0.0644
(2.60)***
Relatedness
(-0.15)
0.1960
Relative Size
Market-to-Book Ratio
0.5628
(0.83)
(1.39)
-0.2546
-0.5566
(-2.15)**
(-1.85)*
0.0124
0.0251
(0.72)
N
994
2
Pseudo R
0.0059
(0.96)
1.6320
(1.50)
Toehold
866
0.2247

(-0.33)
1.4348
Hostile
0.4364
-0.2291
(1.30)
Termination Fee
(0.61)
(0.94)
236
0.0005
219
0.2216

For overnight
announcements, the
coefficients on the cash
payment dummy are
significantly positive.
For daytime
announcements, the
cash payment dummy
does not have any
significant impact on
the probability of bid
success.
V. Evidence on Deterring Competition by Cash Payments
for Different Announcement Times



Tables 6 to 8 show that overnight announcements of cash payment offers
lower the likelihood of competition.
Tables 9 and 10 show that cash payment acquisition offers announced
overnight are more likely to result in successful completion.
Because overnight cash payment offers are more likely to deter potential
competing, the likelihood of bid success is higher for these deals.
26
VI. Two-stage estimation of cash payments and acquisition
premiums for different announcement times



Payment methods and premiums are likely to be simultaneously determined.
Thus, we need to show that managers strategically announce cash payment
offers during nontrading periods, which result in higher premiums.
To address the potential endogeneity problem between cash payment offers
and acquisition premiums, we follow Officer (2003) and estimate the
relation between these two decisions using a two-stage regression approach.
27
Table 11
Two-stage Regression Analysis of Cash Payments and Acquisition Premiums by
Announcement Timing
Variable
Intercept
Cash or Premium Instrument
Second-stage Regressions
Nontrading-Hours
Trading-Hours
Announcements
Announcements
Dep. Var. =
Dep. Var. =
Dep. Var. =
Dep. Var. =
Acquisition
Cash
Acquisition
Cash
Premium
Payment
Premium
Payment
(OLS)
(Logistic)
(OLS)
(Logistic)
0.3007
-0.7443
0.1956
3.3131
(11.46)***
(-0.49)
(3.22)***
(1.55)
0.0395
(2.43)**
Tender Offer
Termination Fee
2.2922
(0.48)
0.0411
(1.17)
1.8086
(4.18)***
-9.7756
(-1.22)
2.2874
(3.03)***
0.0523
(1.91)*
-0.9819
(-4.96)***
0.0911
(1.43)
-1.1856
(-2.73)***
Poison
-0.1092
(-0.90)
1.0754
(1.04)
0.0025
(0.01)
-0.5646
(-0.36)
Hostile
0.0133
(0.25)
-0.4169
(-0.98)
-0.0130
(-0.16)
0.0596
(0.08)
Toehold
-0.1626
(-2.72)***
1.2789
(1.77)*
-0.0610
(-0.85)
-0.3971
(-0.49)
Financial Industry
-0.0216
(-0.77)
-0.4634
(-1.83)*
-0.0361
(-0.75)
-1.1646
(-1.96)**
Relatedness
0.0340
(1.45)
Relative Size
0.0193
(0.65)
Market-to-Book Ratio
N
Adjusted R2
Pseudo R2
0.0595
(1.46)
--1.4004
(-3.88)***

-0.0524
(-1.36)
-1.2547
(-1.87)*
-0.0009
(-1.51)
-0.0009
(-0.11)
0.0056
(1.32)
-0.1113
(-1.94)*
866
0.0216
-
866
0.1710
219
0.0359
-
219
0.1965


Overnight cash
payments have a
significantly positive
influence on acquisition
premiums, while
premiums do not
significantly affect the
probability of cash
offers.
Cash payments offers
result in higher
premiums for target
shareholders only when
announcements are
made during nontrading
periods.
Managers strategically
announce cash payment
offers during the
overnight periods as an
instrument to signal the
high valuation of the
target to the market.
VII. Conclusion





For overnight announcements, the acquisition premiums and target stock
returns are significantly higher when the acquisitions are financed with
cash.
Furthermore, overnight cash payment offers are more likely to result in a
significantly lower frequency of multiple competitors and a significantly
higher frequency of bid.
However, we do not find such relationship for daytime acquisition
announcements.
Acquisition announcements signaling the bidder’s high valuation of the
target, through a cash offer with large premiums, is more likely to be made
during nontrading hours.
The acquisition announcement timing of bidders is an important
consideration in assessing the effects of the method of payment on
signaling target valuation and preempting competing bids.
29