Are stock-financed takeovers opportunistic?
Cancelled
Event details
| Date | 20.03.2015 |
| Hour | 10:30 › 12:00 |
| Speaker | B. Espen ECKBO (Tuck School of Business at Dartmouth) |
| Location | |
| Category | Conferences - Seminars |
The estimated probability that a bidder offers all-stock as payment in takeovers increases with measures of market overvaluation of bidder shares. However, when we instrument the bidder pricing error using aggregate mutual fund flows, the reverse happens: greater bidder overvaluation reduces the all-stock payment propensity. Since the price pressure created by aggregate fund flows is exogenous to bidder fundamentals - while directly impacting bidder pricing errors - this evidence rejects the notion that all-stock financed takeovers are opportunistic. Bidders paying with stock tend to be small, non- dividend paying growth companies with low leverage, suggesting that financing constraints play an important role in the all-stock payment decision. Moreover, all-stock payment is more likely in high-tech industries, when the two firms operate in highly complementary industries, and when the target is geographically close, indicating that targets in all-stock bids are relatively informed about bidder value. Overall, our evidence does not suggest a particular role for bidder mispricing in driving the all-stock payment decision in takeovers.
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