Predicting the Outcome of Tender Offers: An Endogeneity Problem Available to Purchase

This paper proposes an alternative method of estimating a model that predicts the outcome of a tender offer. We argue that previous econometric models designed to predict the outcome of a tender offer have been estimated incorrectly. Explanatory variables which are endogenous have been treated as though they were exogenous. Ignoring the endogeneity problem results in estimates of re‐gression coefficients which are inconsistent. In order to derive consistent estimates of the regression coefficients, we construct a simultaneous equation model to explain the outcome of a tender offer. Since two of the three dependent variables in the simultaneous equation model are dichotomous, it is necessary to use the two stage limited dependent variable estimator (2SLDV) to find consistent estimates of the regression coefficients.