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Does Investor Misvaluation Drive the Takeover Market?
Ming Dong York University - Schulich School of Business David A. Hirshleifer University of California, Irvine - Paul Merage School of Business Scott A. Richardson Barclays - Barclays Global Investors (BGI); University of Pennsylvania - The Wharton School Siew Hong Teoh University of California - Paul Merage School of Business Journal of Finance, Vol. 61, No. 2, pp. 725-762, April 2006 Abstract: This paper uses pre-offer market valuations to evaluate the misvaluation and Q theories of takeovers. Bidder and target valuations (price-to-book, or price-to-residual-income-model-value) are related to means of payment, mode of acquisition, premia, target hostility, offer success, and bidder and target announcement-period returns. The evidence is broadly consistent with both hypotheses. The evidence for the Q hypothesis is stronger in the pre-1990 period than in the 1990-2000 period, whereas the evidence for the misvaluation hypothesis is stronger in the 1990-2000 period than in the pre-1990 period.
Keywords: takeovers, misvaluation, market efficiency, behavioral finance JEL Classifications: G34, G14, G31 Accepted Paper SeriesDate posted: October 06, 2008 ; Last revised: October 19, 2008Suggested CitationContact Information
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