@article{e628a0a5d2594766b11de758c1d1023f,
title = "The liquidity and trading activity effects of acquisition payment methods: Evidence from the announcements of private firms{\textquoteright} acquisition",
abstract = "We investigate how the liquidity and trading activity effects of the announcement of the acquisition of private targets vary by payment method. We find significant increases in trading activity around acquisition announcement dates irrespective of the payment method used; however, fluctuations are lower for acquisitions financed by earnouts and cash. Similarly, the stocks of acquirers using cash and earnouts are also less affected by a general loss of liquidity that accompanies announcements. We show that these effects are explained by the interpretation of cash acquisition by the market as an option used when acquirers perceive no risk of being adversely selected, and the potential of earnout as an adverse selection risk reduction tool.",
keywords = "earnout financing, information asymmetry, acquisition announcements, liquidity, payment methods",
author = "Eleonora Monaco and Gbenga Ibikunle and Riccardo Palumbo and Zeyu Zhang",
note = "Funding Information: The research work described in this paper was partially supported by the European Capital Markets Cooperative Research Center (ECMCRC). The authors would also like to thankLeonidas Barbopoulos, Jo Danbolt, Petko Kalev, Maurizio Murgia and participants at both the 2017 European Capital Markets CRC conference, the 2018 International Symposium in Finance, the IX Financial Reporting Workshop for helpful comments. All errors and omissions are the authors' own. Funding Information: The research work described in this paper was partially supported by the European Capital Markets Cooperative Research Center (ECMCRC) . The authors would also like to thankLeonidas Barbopoulos, Jo Danbolt, Petko Kalev, Maurizio Murgia and participants at both the 2017 European Capital Markets CRC conference, the 2018 International Symposium in Finance, the IX Financial Reporting Workshop for helpful comments. All errors and omissions are the authors' own. Publisher Copyright: {\textcopyright} 2022 Elsevier Inc.",
year = "2022",
month = jul,
doi = "10.1016/j.irfa.2022.102187",
language = "English",
volume = "82",
journal = "International Review of Financial Analysis",
issn = "1057-5219",
publisher = "Elsevier",
}