Stock Market Driven Acquisitions

Shleifer, Andrei; Vishny, Robert W.

doi:10.2139/ssrn.278563

Download This Paper

Open PDF in Browser

Add Paper to My Library

Stock Market Driven Acquisitions

29 Pages Posted: 4 Oct 2001

See all articles by Andrei Shleifer

Andrei Shleifer

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Robert W. Vishny

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

There are 2 versions of this paper

Date Written: June 2001

Abstract

We present a model of mergers and acquisitions based on stock market misvaluations of the combining firms. The key ingredients of the model are the relative valuations of the merging firms, the horizons of their respective managers, and the market's perception of the synergies from the combination. The model explains who acquirers whom, whether the medium of payment is cash or stock, what are the valuation consequences of mergers, and why there are merger waves. The model is consistent with available empirical findings about characteristics and returns of merging firms, and yields new predictions as well.

JEL Classification: G34

Suggested Citation: Suggested Citation

Shleifer, Andrei and Vishny, Robert W., Stock Market Driven Acquisitions (June 2001). Available at SSRN: https://ssrn.com/abstract=278563 or http://dx.doi.org/10.2139/ssrn.278563