Abstract

We compare the PIN estimates using the Easley, Hvidkjaer, and O’Hara (2002) and Yan and Zhang (2012) estimation methods over the takeover announcement life cycle based on intraday data for 54 U.S. biotech acquirers and 95 U.S. biotech targets between 2005 and 2011. We find that: (1) the Yan and Zhang method is subject to (generally not significantly) less downward bias; (2) the estimates for the Easley et al. method increase significantly as the number of observations used in their estimation increases; and (3) firm characteristics such as book-to-market ratio, financial leverage, firm size, insider holdings, institutional holdings, and research and development expenses are determinants of the PIN estimates. Consistent with the previous literature, the cumulative abnormal returns around announcement dates are more significant for targets than acquirers and are strongly associated with firm size and the book-to-market ratio.