Stock Market Driven Acquisitions

29 Pages Posted: 20 Aug 2001 Last revised: 23 Oct 2010

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)

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Date Written: August 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.

Suggested Citation

Shleifer, Andrei and Vishny, Robert W., Stock Market Driven Acquisitions (August 2001). NBER Working Paper No. w8439. Available at SSRN: https://ssrn.com/abstract=280292

Andrei Shleifer (Contact Author)

Harvard University - Department of Economics ( email )

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HOME PAGE: http://www.economics.harvard.edu/~ashleife/

National Bureau of Economic Research (NBER)

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European Corporate Governance Institute (ECGI)

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Robert W. Vishny

University of Chicago - Booth School of Business ( email )

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United States
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312-702-0118 (Fax)

National Bureau of Economic Research (NBER)

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