Abstract

http://ssrn.com/abstract=1709609
 
 

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Put Your Money Where Your Mouth is: Treasury Shares as Currency


Nicole Thorne Jenkins


University of Kentucky - Von Allmen School of Accountancy, Gatton College of Business and Economics

Alexei V. Ovtchinnikov


HEC Paris - Finance Department

November 15, 2010


Abstract:     
This paper examines the historical question of whether treasury shares and newly issued shares are equivalent by considering their use in stock based M&A transactions. We quantify the differential market response to M&A announcements when bidders have sufficient currency in the form of cash or treasury shares to execute the deal versus bidders with insufficient currency. We confirm prior findings of a nonnegative market reaction to cash mergers of public targets and determine that this finding holds irrespective of the sufficiency of their currency on hand. In addition, we find that the presence of sufficient currency at the date of a stock M&A announcement leads to a significantly more favorable market reaction for public targets. Our results demonstrate that the legal equivalency of treasury and newly issued shares does not extend to these forms of currencies being economically equivalent.

Number of Pages in PDF File: 40

Keywords: Mergers & Acquisitions, financing methods, treasury shares

JEL Classification: G34, G32

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Date posted: November 16, 2010  

Suggested Citation

Jenkins, Nicole Thorne and Ovtchinnikov, Alexei V., Put Your Money Where Your Mouth is: Treasury Shares as Currency (November 15, 2010). Available at SSRN: http://ssrn.com/abstract=1709609 or http://dx.doi.org/10.2139/ssrn.1709609

Contact Information

Nicole Thorne Jenkins (Contact Author)
University of Kentucky - Von Allmen School of Accountancy, Gatton College of Business and Economics ( email )
Lexington, KY 40506
United States
Alexei V. Ovtchinnikov
HEC Paris (Groupe HEC) - Finance Department ( email )
1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

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