The Value of (Stock) Liquidity in the M&A Market

61 Pages Posted: 18 Mar 2010 Last revised: 12 Apr 2013

See all articles by Massimo Massa

Massimo Massa

INSEAD - Finance

Moqi Groen-Xu

London School of Economics & Political Science (LSE)

Date Written: July 15, 2012


We study the value of stock liquidity in the market for corporate control and show that the target firm’s liquidity has an impact on the transaction itself as well as on the resulting merged entity. We use a sample of US M&A transactions 1987 through 2007 to show that acquiring a more liquid firm makes the stock of the acquirer more liquid. This has consequences on M&A activity and pricing. Public acquirers are more likely than private acquirers to acquire more liquid targets. It also translates into a greater likelihood of completing the deal and higher compensation for the target.

Keywords: Mergers and Acquisitions, Liquidity, Choice between Private and Public Acquirers

JEL Classification: G34, G32

Suggested Citation

Massa, Massimo and Groen-Xu, Moqi, The Value of (Stock) Liquidity in the M&A Market (July 15, 2012). Available at SSRN: or

Massimo Massa

INSEAD - Finance ( email )

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Moqi Groen-Xu (Contact Author)

London School of Economics & Political Science (LSE) ( email )

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London, WC2A 2AE
United Kingdom

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