Intraday Changes in Target Firms' Share Price and Bid‐ask Quotes Around Takeover Announcements

This paper documents changes in share prices, bid‐ask spreads, and quote sizes for target firms during the day a takeover proposal is announced. The mean 21.2 percent announcement‐day return consists primarily of a 19.5 percent return at the announcement. There is little evidence that spreads increase before the announcement, except when trading is suspended because of an order imbalance. Quote sizes show some sign of decreasing just before the announcement. The quoted bid‐ask spread and size increase immediately after the announcement, but spreads quickly return to normal.