Table 11

Effects of truncating or censoring the distributions of runups, markups, or premiums on the distribution of the runup index (runup / premium). Also, the effects of truncation or censoring on the average runup, the average premium, and the regression relation between the premium and the runup. Runup is the cumulative abnormal return to the target's stock from day -42 to day -1 relative to the first bid. Markup is the cumulative abnormal return to the target's stock from the day of the first bid through delisting or 126 trading days after the first bid, whichever comes first. White's (1980) heteroskedasticity-consistent standard errors are used to calculate t-tests for whether the coefficient in the regression of premium on runup equals one. The "main sample" includes 1,174 successful mergers and tender offers for exchange-listed target firms, 1975-91. It excludes deals that took longer than one year to consummate and target firms whose equity value is small (below $10 million) or whose pre-runup stock price is low (below $2 per share).

Sample Selection Method
Selection CriteriaMain Sample Truncation Method ICensoring Method I Truncation Method IICensoring Method II
Runup < 0IncludeIndex = 0OmitIndex = 0Omit
Markup < 0IncludeIndex = 1Omit
Premium < 0IncludeIndex = 1Omit
Runup < 0 & Markup < 0Omit
Runup < 0 & Premium < 0Omit
Summary Statistics for Runup and Its Relation with the Premium
Standard Deviation17.4123.1993.5790.3640.262
Sample Size1,1741,0568361,098713
Summary Statistics for the Runup Index, (Runup / Premium)
Average Runup0.1430.1720.2210.1600.213
Average Premium0.3010.3600.4200.3430.460
Runup Coefficient1.0180.7610.8140.8290.894
t-test for Runup Coef=10.45-5.70-3.63-4.56-2.11

© Copyright 1996, G. William Schwert
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