Abstract
Limited investor attention allows overvalued companies to engage in stock-financed acquisitions of listed target firms without experiencing significant reductions in existing valuations. Our robust findings show that overvalued stock-paying acquirers that are subject to limited investor attention do not experience significant announcement period wealth losses. However, the overvaluation of these acquirers is corrected in the post-announcement period. By contrast, the overvalued acquirers that receive high investor attention and use stock as the payment method in their listed target acquisitions experience negative announcement period abnormal returns. The widely documented evidence that stock-financed acquisitions are associated with significant announcement period wealth losses is primarily driven by deals in which the acquirers are subject to high investor attention. Crown Copyright © 2017 Published by Elsevier B.V. All rights reserved
| Original language | English |
|---|---|
| Pages (from-to) | 108-125 |
| Number of pages | 18 |
| Journal | Journal of Empirical Finance |
| Volume | 45 |
| Early online date | 19 Oct 2017 |
| DOIs | |
| Publication status | Published - Jan 2018 |
Keywords
- investor attention
- corporate takeovers
- payment method
- acquirer abnormal returns
- volume return premium
- propensity score
- earnings announcements
- matching estimators
- market
- firms
- inattention
- information
- decisions
- payment
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Leonidas Barbopoulos
- Business School - Chair in Finance
- Accounting and Finance
Person: Academic: Research Active