DIRECT EVIDENCE ON THE MARKET‐DRIVEN ACQUISITION THEORY

James S. Ang and Yingmei Cheng

Journal of Financial Research, 2006, vol. 29, issue 2, 199-216

Abstract: We provide direct empirical evidence that share overvaluation is an important motive for firms to make stock acquisitions. We find that more overvalued firms are more likely to acquire with stock, and acquirers are more overvalued in successful stock mergers than in withdrawn mergers. Acquirers' overvaluation, on average, exceeds the targets' premium‐adjusted overvaluation. Shareholders of stock acquirers, whose overvaluation is greater than their targets' premium‐adjusted overvaluation, realize sustained wealth gains from one day before the merger announcement up to three years after the merger completion, as compared with a matching sample of similarly overvalued but nonacquiring firms.

Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (58)

Downloads: (external link)
https://doi.org/10.1111/j.1475-6803.2006.00174.x

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:bla:jfnres:v:29:y:2006:i:2:p:199-216

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0270-2592

Access Statistics for this article

Journal of Financial Research is currently edited by Jayant Kale and Gerald Gay

More articles in Journal of Financial Research from Southern Finance Association Contact information at EDIRC., Southwestern Finance Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().