Misvaluation and Financial Constraints: Method of Payment and Buyer Identity in Mergers & Acquisitions

Aron Berg

No 1157, Working Paper Series from Research Institute of Industrial Economics

Abstract: The paper studies how stock price misvaluation and financial frictions affect whether an acquisition occurs between or within industries and whether the acquirer pays in cash or stocks. I set up a model where stock market misvaluation correlates within industries and across industries and assume that managers have private information regarding their own firm and firms similar to it. The model yields predictions regarding which firm acquires which firm, and the method of payment used in transactions.

Keywords: Mergers and acquisitions; Investments; Asymmetric information; Stock misvaluation; Financial frictions (search for similar items in EconPapers)
JEL-codes: D82 G32 G34 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2017-03-15
New Economics Papers: this item is included in nep-bec
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:hhs:iuiwop:1157

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