Are stock-financed takeovers opportunistic?
Event details
| Date | 11.09.2015 |
| Speaker | Espen ECKBO (Tuck at Dartmouth) |
| Location | |
| Category | Conferences - Seminars |
Conditional on making a takeover bid, bidders are more likely to offer stock as payment for the target when bidder market-to-book ratio (M=B) is high. However, when we instrument M=B with aggregate mutual fund flows - which are exogenous to takeovers - this effect disappears. Moreover, we show that stock-payment is more likely when the two firms are geographically close and operate in complementary industries, and when the bidder has just issued seasoned equity - all of which reduce information asymmetry. Bidders paying with stock also tend to be small, non-dividend paying growth companies with low leverage, suggesting that financing constraints play role in the stock payment decision as well. Overall, our evidence does not suggest a particular role for bidder mispricing in driving the conditional all-stock payment decision in takeovers.
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