Betton, SandraEckbo, B. EspenThompson, RexThorburn, Karin S2023-05-222016-07-182014-08-012017-07-19https://repository.upenn.edu/handle/20.500.14332/34266Do preoffer target stock price runups increase bidder takeover costs? We present model-based tests of this issue assuming runups are caused by signals that inform investors about potential takeover synergies. Rational deal anticipation implies a relation between target runups and markups (offer value minus runup) that is greater than minus one-for-one and inherently nonlinear. If merger negotiations force bidders to raise the offer with the runup—a costly feedback loop where bidders pay twice for anticipated target synergies—markups become strictly increasing in runups. Large-sample tests support rational deal anticipation in runups while rejecting the costly feedback loop.This is the peer reviewed version of the following article: BETTON, S., ECKBO, B. E., THOMPSON, R. and THORBURN, K. S. (2014), Merger Negotiations with Stock Market Feedback. The Journal of Finance, 69: 1705–1745. doi:10.1111/jofi.12151, which has been published in final form at http://dx.doi.org/10.1111/jofi.12151. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving: http://olabout.wiley.com/WileyCDA/Section/id-820227.html#termsFinanceFinance and Financial ManagementArticle