Bond calls, credible commitment and equity dilution: A theoretical and clinical analysis of Simultaneous Tender and Call (STAC) offers
This paper is an exploration of the ability of game theory to explain real-world corporate maneuvering. We explore this issue by investigating bond tender offers accompanied by a threat to call nontendered bonds, so called "Simultaneous Tender and Call" (STAC) offers. We argue that STACs e...
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| Format: | Journal article |
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2001
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| _version_ | 1826299988452311040 |
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| author | Noe, T Dhillon, U Ramirez, G |
| author_facet | Noe, T Dhillon, U Ramirez, G |
| author_sort | Noe, T |
| collection | OXFORD |
| description | This paper is an exploration of the ability of game theory to explain real-world corporate maneuvering. We explore this issue by investigating bond tender offers accompanied by a threat to call nontendered bonds, so called "Simultaneous Tender and Call" (STAC) offers. We argue that STACs engender a transparent game played by bondholders and shareholders. We model this game and use this model to predict the outcome of STACs. Finally, we investigate the issue of whether this theoretical model explains the outcomes of four actual STAC issues made by James River, May Department Stores, and Houston Lighting & Power Company. Our clinical analysis provides support for the explanatory power of our model. Calibrating the predictions of the model with data from these STACs, we demonstrate a correspondence between theory and actual corporate behavior. As predicted by our model, subgame perfection, or threat credibility, and preplay coordination are central to explaining the outcomes of the STACs. |
| first_indexed | 2024-03-07T05:10:18Z |
| format | Journal article |
| id | oxford-uuid:db538ade-9f26-4554-aba1-0ccf15a783e0 |
| institution | University of Oxford |
| last_indexed | 2024-03-07T05:10:18Z |
| publishDate | 2001 |
| record_format | dspace |
| spelling | oxford-uuid:db538ade-9f26-4554-aba1-0ccf15a783e02022-03-27T09:09:45ZBond calls, credible commitment and equity dilution: A theoretical and clinical analysis of Simultaneous Tender and Call (STAC) offersJournal articlehttp://purl.org/coar/resource_type/c_dcae04bcuuid:db538ade-9f26-4554-aba1-0ccf15a783e0Saïd Business School - Eureka2001Noe, TDhillon, URamirez, GThis paper is an exploration of the ability of game theory to explain real-world corporate maneuvering. We explore this issue by investigating bond tender offers accompanied by a threat to call nontendered bonds, so called "Simultaneous Tender and Call" (STAC) offers. We argue that STACs engender a transparent game played by bondholders and shareholders. We model this game and use this model to predict the outcome of STACs. Finally, we investigate the issue of whether this theoretical model explains the outcomes of four actual STAC issues made by James River, May Department Stores, and Houston Lighting & Power Company. Our clinical analysis provides support for the explanatory power of our model. Calibrating the predictions of the model with data from these STACs, we demonstrate a correspondence between theory and actual corporate behavior. As predicted by our model, subgame perfection, or threat credibility, and preplay coordination are central to explaining the outcomes of the STACs. |
| spellingShingle | Noe, T Dhillon, U Ramirez, G Bond calls, credible commitment and equity dilution: A theoretical and clinical analysis of Simultaneous Tender and Call (STAC) offers |
| title | Bond calls, credible commitment and equity dilution: A theoretical and clinical analysis of Simultaneous
Tender and Call (STAC) offers |
| title_full | Bond calls, credible commitment and equity dilution: A theoretical and clinical analysis of Simultaneous
Tender and Call (STAC) offers |
| title_fullStr | Bond calls, credible commitment and equity dilution: A theoretical and clinical analysis of Simultaneous
Tender and Call (STAC) offers |
| title_full_unstemmed | Bond calls, credible commitment and equity dilution: A theoretical and clinical analysis of Simultaneous
Tender and Call (STAC) offers |
| title_short | Bond calls, credible commitment and equity dilution: A theoretical and clinical analysis of Simultaneous
Tender and Call (STAC) offers |
| title_sort | bond calls credible commitment and equity dilution a theoretical and clinical analysis of simultaneous tender and call stac offers |
| work_keys_str_mv | AT noet bondcallscrediblecommitmentandequitydilutionatheoreticalandclinicalanalysisofsimultaneoustenderandcallstacoffers AT dhillonu bondcallscrediblecommitmentandequitydilutionatheoreticalandclinicalanalysisofsimultaneoustenderandcallstacoffers AT ramirezg bondcallscrediblecommitmentandequitydilutionatheoreticalandclinicalanalysisofsimultaneoustenderandcallstacoffers |