Mispricing or growth? an empirical analysis of acquisition premium

Shaojie Lai and Xiaoling Pu

Finance Research Letters, 2020, vol. 37, issue C

Abstract: Comparing acquisition premium paid by private equity (PE) and non-PE bidders, we find that PE bidders offer significantly lower premium. Using short interest as a market misvaluation measure, we find that lower premium from PE bidders is associated with larger market misvaluation of the targets. In addition, we use a multiples-based market-to-book decomposition of Rhodes-Kropf, Robinson, and Viswanathan (RKRV, 2005), and find that private equity bidders would adjust acquisition premium based on firm level misvaluation and the long-term growth value of the targets. Our results suggest that the skill of private equity bidders play an important role in acquisitions.

Keywords: Acquisition premium; Private equity; Short interest; Market-to-book decomposition (search for similar items in EconPapers)
JEL-codes: G34 G41 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:37:y:2020:i:c:s1544612318309231

DOI: 10.1016/j.frl.2019.101359

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