Extending Yagil exchange ratio determination model to the case of\n stochastic dividends

2017/08/31 by Alessandra Mainini, Mainini, Alessandra, Enrico Moretto +1
Business, Management and Accounting · Decision Sciences · Economics, Econometrics and Finance · #91G50 #Advanced Queuing Theory Analysis #FOS: Economics and business #Insurance and Financial Risk Management #Probability and Risk Models #Risk Management (q-fin.RM) #Supply Chain and Inventory Management

paper · pdf · doi:10.48550/arxiv.1708.09810

openalex publication_date 2017/08/31 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28

Abstract

This article extends, in a stochastic environment, the Yagil (1987) model\nwhich establishes, in a deterministic dividend discount model, a range for the\nexchange ratio in a stock-for-stock merger agreement. Here, we generalize\nYagil's work letting both pre- and post-merger dividends grow randomly over\ntime. If Yagil focuses only on changes in stock prices before and after the\nmerger, our stochastic environment allows to keep in account both shares'\nexpected values and variance, letting us to identify a more complex bargaining\nregion whose shape depends on mean and standard deviation of the dividends'\ngrowth rate.\n

Citations

• Covariance of random stock prices in the Stochastic Dividend Discount\n Model

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