Joint work with Pascal Büsing, Nils Lohmeier, and Hannes Mohrschladt

Abstract: We show that the effect of targets' 52-week highs on M&A offer prices varies systematically across countries. We explain these cross-country differences through a simple framework in which target shareholders incentivize corporate managers to consider an economically immaterial anchor. As predicted by our theoretical framework, the effect of the target's 52-week high on its M&A offer price is more pronounced in countries characterized by stringent corporate governance, stronger legal protections for shareholders, and national cultures prone to heuristic decision-making. Our results demonstrate how strict corporate governance can exacerbate inefficiencies in the market for corporate control when shareholder beliefs are biased.

Available at SSRN