Uncertainty During Tender Offers and the Measurement of Shareholder Wealth Effects

Helen M. Bowers, University of Notre Dame
Rodney L. Roenfeldt, University of South Carolina, Columbia
Jack Trifts, Rollins College

Published by Springer Science & Business Media B.V. in the Review of Quantitative Finance and Accounting, volume 1 issue 4, 1991. Bryant users may access this article here.


Uncertainty concerning the ultimate outcome of tender offers may affect the measurement of changes in shareholder wealth. The uncertainty regarding the outcome of tender offers is measured by estimating the probability of acceptance of tender offers during the period when the tender offers are outstanding. The estimated probability of acceptance of tender offers implies that the amount of uncertainty prior to knowledge of the ultimate outcome is substantial and affects the measurement of expected equity gains. The uncertainty-adjusted measure of the change in shareholder wealth indicates that previous studies may have underestimated the gains expected to result from tender offers.