Misvaluation and Financial Constraints: Method of Payment and Buyer Identity in Mergers & Acquisitions | Zendy

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Misvaluation and Financial Constraints: Method of Payment and Buyer Identity in Mergers & Acquisitions

Author(s) -

Aron Berg

Publication year - 2017

Publication title -

ssrn electronic journal

Language(s) - English

Resource type - Journals

ISSN - 1556-5068

DOI - 10.2139/ssrn.2932980

Subject(s) - mergers and acquisitions , payment , business , identity (music) , finance , commerce , acoustics , physics

The paper studies how stock price misvaluation and financial frictions affect whether an acquisition occurs between or within industries and whether the acquirer pays in cash or stocks. I set up a model where stock market misvaluation correlates within industries and across industries and assume that managers have private information regarding their own firm and firms similar to it. The model yields predictions regarding which firm acquires which firm, and the method of payment used in transactions.

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