Abstract

http://ssrn.com/abstract=1855731
 
 

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Do Stock-Financed Acquisitions Destroy Value? New Methods and Evidence


Andrey Golubov


City University London - Sir John Cass Business School

Dimitris Petmezas


University of Surrey - Surrey Business School

Nickolaos G. Travlos


ALBA Graduate Business School

July 30, 2014


Abstract:     
We contribute to the debate on whether stock-financed acquisitions destroy value for shareholders. A stock-financed acquisition is a joint takeover/equity-issue event. Using SEO announcement returns, we estimate through linear prediction and propensity-score matching the share price drop that stock acquirers experience due to the financing choice. Net of this effect, stock-financed acquisitions are not value destructive, and the method of payment generally has no further explanatory power in the cross-section of acquirer returns. Our evidence is largely inconsistent with the agency costs of overvalued equity hypothesis.

Number of Pages in PDF File: 67

Keywords: Mergers and Acquisitions, Method of Payment, Abnormal Returns, Seasoned Equity Offerings, Agency Costs of Overvalued Equity

JEL Classification: G14, G32, G34, D82

working papers series


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Date posted: May 31, 2011 ; Last revised: August 6, 2014

Suggested Citation

Golubov, Andrey and Petmezas, Dimitris and Travlos, Nickolaos G., Do Stock-Financed Acquisitions Destroy Value? New Methods and Evidence (July 30, 2014). Available at SSRN: http://ssrn.com/abstract=1855731 or http://dx.doi.org/10.2139/ssrn.1855731

Contact Information

Andrey Golubov
City University London - Sir John Cass Business School ( email )
106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+44 (0)20 7040 0965 (Phone)
+44 (0)20 7040 8881 (Fax)
HOME PAGE: http://www.cass.city.ac.uk/experts/a.golubov
Dimitris Petmezas
University of Surrey - Surrey Business School ( email )
Guildford, Surrey GU2 7XH
United Kingdom
Nickolaos G. Travlos (Contact Author)
ALBA Graduate Business School ( email )
Athinas Ave. & 2A Areos Str.
Vouliagmeni 166 71, Athens
Greece
HOME PAGE: http://www.alba.edu.gr
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