Capital Punishment: Signaling Takeover Intentions by Raising Capital

Using a sample of 1060 takeover announcements from 1982 to 2006, this study is the first to document significant short-run cumulative average abnormal returns (CAARs) in target firms occurring at the time bidding firms last announced raising capital prior to the takeover bid. These target CAARs are substantially higher in combination with other documented takeover signals, such as when takeover bids have recently occurred within the same target...