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Does overvaluation of bidder stock drive acquisitions? The case of public and private targets

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Does overvaluation of bidder stock drive acquisitions? The case of public and private targets

John, Kose, Mateti, Ravi S., Shangguan, Zhaoyun and Vasudevan, Gopala (2013) Does overvaluation of bidder stock drive acquisitions? The case of public and private targets. International Journal of Banking, Accounting and Finance, 5 (1/2). p. 188. ISSN 1755-3830

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Official URL: http://dx.doi.org/10.1504/IJBAAF.2013.058093

Abstract

We test the implications of the Misvaluation hypothesis (Shleifer and Vishny, 2003) for a large sample of acquirers of private and public target firms. Consistent with the Misvaluation hypothesis we find that acquirers are overvalued. The overvaluation is higher for stock acquisitions of private targets. We find that the announcement period returns are lower for firms that are overvalued at the time of acquisition. Announcement period returns are lower for larger acquisitions of public targets and higher for larger acquisitions of private targets. We also examine the factors that determine stock as the method of payment. Consistent with the Misvaluation hypothesis we find that firms that have higher valuation measures at the time of acquisition tend to use stock. Acquirers of public targets tend to use stock more frequently.

Divisions:Concordia University > John Molson School of Business > Finance
Item Type:Article
Refereed:Yes
Authors:John, Kose and Mateti, Ravi S. and Shangguan, Zhaoyun and Vasudevan, Gopala
Journal or Publication:International Journal of Banking, Accounting and Finance
Date:2013
Digital Object Identifier (DOI):10.1504/IJBAAF.2013.058093
ID Code:978216
Deposited By: DAVID MACAULAY
Deposited On:20 Jan 2014 15:14
Last Modified:18 Jan 2018 17:46
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