Heterogeneous Market Responses and the Listing Effect in M&A

Qingzhong Ma (), David A. Whidbee () and Wei Zhang ()
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Qingzhong Ma: School of Hotel Administration, Cornell University, Ithaca, NY 14853, USA
David A. Whidbee: Department of Finance, Insurance, and Real Estate, Washington State University, Pullman, WA 99164-4746, USA
Wei Zhang: School of Business, Ithaca College, Ithaca, NY 14850, USA

Quarterly Journal of Finance (QJF), 2012, vol. 02, issue 02, 1-49

Abstract: Unlisted acquisitions differ from listed ones in three important aspects: the possibility of forming blockholders, which substitute debt as a monitoring mechanism; the liquidity discount, which mitigates managerial hubris; and the distinct deal process through which two-sided asymmetric information is revealed. Due to these differences, same firm and deal characteristics could induce heterogeneous market responses, depending on the target listing status. We find that such heterogeneous responses exist in usual characteristics such as method of payment, relative size, acquirer size, leverage, and market-to-book ratios. After these heterogeneous responses are incorporated, the puzzling "listing effect" disappears. Our results also indicate that the conventional approach used to investigate pooled samples of listed and unlisted acquisitions is effectively misspecified due to omitted variables.

Keywords: Merger; acquisition; listing effect; heterogeneous market response; unconstrained approach (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (3)

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DOI: 10.1142/S2010139212500073

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