An investigation of the acquisition process in the market for corporate control

The dissertation explores the determinants of the choice between friendly mergers and hostile tender offers as alternative acquisition methods in the market for corporate control. The theoretical model focuses on the target management's firm specific human capital as a primary determinant of the choice. The model predicts that firm characteristics like low insider holdings and high debt, indicating the presence of incumbent management's firm specific human capital, increase the likelihood of a friendly merger as opposed to a hostile tender offer. Other firm characteristics that influence the choice of acquisition method emerge from Jensen's (1986) free cash flow theory. The empirical testing of the hypotheses uses state-based sampling and conditional maximum likelihood estimation of logit models. The results provide strong evidence in support of the theoretical model developed in the dissertation and Jensen’s free cash flow theory.