Are Stock-for-Stock Acquirers of Unlisted Targets Really Less Overvalued?

Research output: Contribution to journalArticle

6 Citations (Scopus)

Abstract

Extant studies assume that targets' private ownership mitigates acquirers' incentives and opportunities to finance acquisitions with inflated stocks. This view stems from the observation that, although the average stock-for-stock acquirer's merger announcement return is negative when the target is listed, it is positive when the target is unlisted. Accordingly, extant studies often suggest that announcements of stock-for-stock acquisitions of unlisted targets convey favorable private information about the acquirers. However, an analysis of stock-for-stock acquirers' stock performance, abnormal accruals, net operating assets, and insider trading suggests the opposite. Acquirers of unlisted targets are generally more overvalued than acquirers of listed targets.

Original languageEnglish (US)
Pages (from-to)901-929
Number of pages29
JournalFinancial Management
Volume42
Issue number4
DOIs
StatePublished - Dec 1 2013

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Mergers
Finance
Incentives
Announcement returns
Stock performance
Abnormal accruals
Assets
Announcement
Private information
Insider trading
Private ownership

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics

Cite this

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title = "Are Stock-for-Stock Acquirers of Unlisted Targets Really Less Overvalued?",
abstract = "Extant studies assume that targets' private ownership mitigates acquirers' incentives and opportunities to finance acquisitions with inflated stocks. This view stems from the observation that, although the average stock-for-stock acquirer's merger announcement return is negative when the target is listed, it is positive when the target is unlisted. Accordingly, extant studies often suggest that announcements of stock-for-stock acquisitions of unlisted targets convey favorable private information about the acquirers. However, an analysis of stock-for-stock acquirers' stock performance, abnormal accruals, net operating assets, and insider trading suggests the opposite. Acquirers of unlisted targets are generally more overvalued than acquirers of listed targets.",
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Are Stock-for-Stock Acquirers of Unlisted Targets Really Less Overvalued? / Louis, Henock.

In: Financial Management, Vol. 42, No. 4, 01.12.2013, p. 901-929.

Research output: Contribution to journalArticle

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