Table A1

Coefficients for runup, R, in a regression of premium, P, on R, where the probability of a successful takeover, p, is drawn from a uniform distribution over the interval [l, u]. E(p) and Var(p) are the mean and variance of the takeover probability, respectively. plim b is the probability limit of the coefficient of R implied by this model for runup, with E(P) = 0.238 and Var(P) = 0.131 (the values from the main sample of 1,523 takeovers of exchange-listed target firms, 1975-91). In general, the pre-bid markup and the post-bid runup will be positively correlated, as shown by plim b > 1, when the premium is predetermined.

Lower limit, lUpper limit, uE(p)Var(p)plim b
0.001.000.500.0831.360
0.050.950.500.0671.440
0.100.900.500.0541.530
0.150.850.500.0411.620
0.200.800.500.0301.710
0.250.750.500.0211.790
0.300.700.500.0131.860
0.350.650.500.0071.920
0.400.600.500.0031.970
0.450.550.500.0011.990
0.500.500.500.0002.000

© Copyright 1996, G. William Schwert
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