EconPapers    
Economics at your fingertips  
 

Are stock-financed takeovers opportunistic?

B. Eckbo (), Tanakorn Makaew and Karin Thorburn

No 11974, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The more the target knows about the bidder, the more difficult it is to pay with overpriced shares. Thus, under bidder opportunism, the fraction of stock in the deal payment is lower with better-informed targets. We test this simple prediction using information proxies reflecting industry relatedness and geographic location specific to the merging firms. We find instead that public bidders systematically use more stock in the payment when the target knows more about the bidder. While inconsistent with opportunism, this is as predicted when bidders are primarily concerned with adverse selection on the target side of the deal. Moreover, tests based on exogenous variation in bidder market-to-book ratios, identified using aggregate mutual fund outflows, also fail to support bidder opportunism. Finally, "cash-only" targets and potential competition from private bidders appear to place significant external pressure on public bidders to pay in cash.

Keywords: cash payment; governance; information asymmetry; mispricing; mutual fund flow; opportunism; payment method; stock payment; Takeover bidding (search for similar items in EconPapers)
JEL-codes: G3 G34 (search for similar items in EconPapers)
Date: 2017-04
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=11974 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Are stock-financed takeovers opportunistic? (2018) Downloads
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:cpr:ceprdp:11974

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... rs/dp.php?dpno=11974

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().

 
Page updated 2019-04-17
Handle: RePEc:cpr:ceprdp:11974