Larger Return to Cash Acquisitions: Signaling Effect or Leverage Effect?

Ken C. Yook
Additional contact information
Ken C. Yook: Johns Hopkins University

The Journal of Business, 2003, vol. 76, issue 3, 477-498

Abstract: This article investigates the signaling theory and the benefit of debt theory to explain higher returns for bidders offering cash rather than stock, using Standard and Poor's debt rating reviews and changes. Results imply that cash acquisitions and stock acquisitions have different sources of value creation. Benefit of debt seems to be the main source of value in cash acquisitions, whereas the synergy effect outweighs the leverage effect in stock takeovers. Although stock appears to be used for the most unsuccessful acquisitions, this study does not find convincing evidence that cash is used for good acquisitions.

Date: 2003
References: Add references at CitEc
Citations: View citations in EconPapers (31)

Downloads: (external link)
http://dx.doi.org/10.1086/375255 main text (application/pdf)
Access to the online full text or PDF requires a subscription.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jnlbus:v:76:y:2003:i:3:p:477-498

Access Statistics for this article

More articles in The Journal of Business from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().