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, l||Upper limit, u||E(p)||Var(p)||plim b|